By Dr. James M. Dahle, WCI Founder
Like anything on this blog, take what you find useful and leave the rest. If you are not religious or not Christian, you may find the subject of tithing and how much you should do it fascinating. You may find it boring or even silly. If so, feel free to browse on over to another post. Try to resist making snide remarks in the comment section.
Jewish people have something similar to tithing called Tzedakah, but this is more of an optional charitable donation rather than any sort of a strict tithing code that requires the calculation of a percentage of income. Or perhaps you are Christian but view tithing simply as any money donated to your church or, perhaps, just to charity in general. Still, others view it as an Old Testament law that was superseded by a higher law after the coming of Jesus Christ. Again, these folks will not find the majority of this post useful. In fact, they'll likely find it pharisaical and legalistic.
This post isn't for them. It is written for those belonging to denominations that have a relatively strict definition of tithing. Muslims may find some of this useful, as one of the five pillars of Islam is Zakat, which is giving 2.5% to charity. However, Zakat is 2.5% of wealth above a minimum (but a controversial amount) known as Nisab. It is not given to a mosque but directly to the poor or indirectly to the poor through a Zakat collector.
Read on to learn more about tithing and what approach you could take.
What Is Tithing?
Tithing is defined simply as “one-tenth,” and the idea behind it is that faithful Christians pay 1/10th of their income to God via His church. Simple enough, right? Five-year-olds in Sunday School can quickly grasp the concept that if they are given 10 pennies, they should give one back to God since He provided all 10 of them. Perhaps the most famous verses of scripture about tithing are found in the Book of Malachi in the Old Testament:
“Will a man rob God? Yet ye have robbed me. But ye say, Wherein have we robbed thee? In tithes and offerings. Ye are cursed with a curse: for ye have robbed me, even this whole nation. Bring ye all the tithes into the storehouse, that there may be meat in mine house, and prove me now herewith, saith the Lord of hosts, if I will not open you the windows of heaven and pour you out a blessing, that there shall not be room enough to receive it. And I will rebuke the devourer for your sakes, and he shall not destroy the fruits of your ground; neither shall your vine cast her fruit before the time in the field, saith the Lord of hosts.”
While tithing is used for the work of the church, the reason it is paid is not necessarily to further the work of the church. It's simply because a believer is commanded to do so. Not only will the believer be blessed for doing so, but the tithe-payer will better remember the role of money in their life, keep it in its proper place, and develop a stewardship mentality.
However, once you start spending a lot of time thinking about tithing and/or trying to calculate out 10% of your income, you quickly realize this is not nearly as simple as it seemed back in Sunday School. Which brings us to the first and most important principle about calculating your “tithing bill.”
How Much You Should Tithe? It Should Be Between You and God.
That's right. If you're unsure what to do, pray about it, decide between you and God what is reasonable, and pay that. I'm serious. This is the most important principle. Reasonable people can disagree on every other recommendation in this post. If you do disagree, come back to this one and do whatever you think and feel is best. Now, let's go down the rabbit hole. With each topic, I'll explain the dilemma and provide my recommendation.
Tithe on Gross or Net? How to Calculate Tithe.
Perhaps the most common discussion about tithing—and about as deep as any Sunday School discussion ever goes—is whether you should pay tithe before or after taxes. Your gross income or your net income? It's a serious question, so we can simply dismiss simplistic sayings such as, “Do you want gross blessings or net blessings?” If your effective tax rate is 33%, 10% of your gross income is 15% of your net income. That's a substantial difference.
We can start with the position that one should pay on gross income. The argument is that you receive something in exchange for the taxes you pay. You get a military and cops and roads and schools. However, a reasonable counterargument is that a higher earner should only pay on some portion of that, since we all use the military and cops and roads pretty equally. Perhaps that high earner should only pay tithing on part of those taxes paid. For example, the average American tax bill is about $15,000, and the median tax bill is significantly lower. Maybe one should only pay tithing on the first $15,000 of taxes paid each year. However, does that mean a low earner needs to pay extra tithing for their share of the average tax bill? That seems kind of tough.
Or imagine you live in a country with much higher effective tax rates. Maybe it's fine to pay on gross in the US, where the effective tax rate averages about 22%. But what about in Sweden, where it averages 57%? Now 10% of gross equals 23% of net.
By the way, if you pay on net, remember to pay on your tax refund!
Personally, my take is that it's best to pay on gross income, but I admit I don't feel particularly strongly about it. You want to pay on net? Knock yourself out.
Payroll Taxes
There is more to taxes than just your income taxes. What about those payroll taxes like Social Security and Medicare? I think it's fine to go either way on these; you just need to stay consistent. If you want to pay tithing on taxes paid, then I wouldn't pay tithing on benefits received down the road from Social Security or Medicare. If you decide to exclude Social Security and Medicare taxes from your income before you calculate your tithing bill, you should probably count any benefits received as income.
Note that the self-employed seemingly pay more in Social Security and Medicare taxes, since they pay both the employee and employer half of those taxes. Is an employee who doesn't add back in the employer half of those taxes to his or her income “cheating” on their tithing? I don't know, but again, I think it's best to remain consistent. If you didn't pay tithing on the employer half when you were an employee, then feel free not to pay it on the employer half once you are self-employed. Take a “tithing deduction” for that portion of your tax bill.
Personally, I find it easiest to pay on the amount paid in payroll taxes but plan not to pay later on benefits received. Those would be relatively easy to calculate for Social Security but very difficult to calculate for Medicare. I don't pay on the employer half of these taxes.
Employer Benefits
Payroll taxes aren't the only thing your employer is covering for you. For many employees, the employer also purchases insurance such as health, life, and disability insurance. Perhaps part of the premium is paid by the employee, deducted each month from their paychecks. Should they be paying tithing on the portion paid by the employer? If not, what about those who purchase health insurance on the open market or pay for it as an employer? Again, I recommend consistency. Most people start out life as an employee and don't pay tithing on any benefit paid for by the employer. Do the same thing once you are the employer. That means healthcare is generally paid for both pre-tax and pre-tithing. I can live with that. Likewise, if you aren't paying tithing on the premiums your employer pays for your life and disability, I would plan on paying tithing on those benefits should you ever receive them.
Life and Disability Insurance
Term life and individual disability insurance are generally paid for with post-tax dollars, and any benefits paid are also post-tax. I think that's a good rule to apply to your tithing too. Pay on the premiums but not on any disability benefits received. The term life decision will be on your heirs, of course. See the discussion about inheritances below.
Retirement Accounts
Next, we come to the subject of retirement accounts. If you put post-tithing money into retirement accounts and then try to pay tithing on any increase you get in those accounts, you will quickly find the tithing bill either eats up a huge chunk of your earned income as the accounts become larger and larger or it requires you to make periodic withdrawals from those accounts paying taxes at a high rate in addition to early withdrawal penalties. I think there are two reasonable approaches to this dilemma, and neither requires tithing calculations or payments on earnings in the account as it grows. Either pay tithing on the money when you put it in the account and then never again (kind of like a Roth IRA), or take a “tithing deduction” for money put into the account and simply pay tithing on the withdrawals from the account (like a tax-deferred 401(k)). I think the latter is the simpler and fairer way to do it, so that's what I do.
Health Savings Accounts
Health Savings Accounts (HSAs) can be treated similarly. There is an additional dilemma, though, since HSA withdrawals can only be taken without penalty if the money is spent on approved healthcare expenses. You cannot take out an extra 10% for tithing and expect the IRS to not require a penalty. However, since these withdrawals are likely a relatively small portion of your living expenses, I think it is much easier to pay tithing on them from another source of funds. Again, for me, money goes in pre-tithing and is tithed when it comes out.
529s and ESAs
A similar dilemma is faced with 529s and other educational accounts. One cannot take an extra 10% out for tithing without paying a penalty. However, I hope most can simply cover that additional 10% from their other sources of income. Alternatively, you can say the 529 is the kid's income, and they should pay the tithing on it. However, I think that's a much heavier lift for a college student to come up with $4,000 in tithing after making a $40,000 529 withdrawal for college tuition, room, and board. I think it's best to put in pre-tithed dollars and have the parents pay tithing on withdrawn money using other income.
The Taxable Account
The taxable account becomes more interesting still. In this case, I think it is easiest to pay tithing on the money before it goes in, just like you pay taxes. Now your basis is post-tithing money and you can calculate your tithing bill along with your tax bill. If the investments produce dividends, interest, rent, or capital gains distributions, then you pay tithing on them as you pay taxes on them. That still leaves some dilemmas, however.
For example, is depreciation real or not? Should you get a tithing deduction on depreciation? Should you then pay tithing on depreciation recapture? Or should you ignore both when calculating your tithing (which is what I do)?
How about capital losses? Should you get a tithing deduction for those? If you are going to pay on capital gains, then I think it is only reasonable that you take a tithing deduction for capital losses.
Speaking of capital gains, just because the IRS makes you pay taxes on capital gains attributable solely to inflation doesn't mean that God does. Maybe you should subtract out the portion of the gain attributable to inflation before calculating your tithing. If you want to do that, then you'll need a fair measurement of inflation. Lots of people feel the federal government's Consumer Price Index (CPI) understates inflation. What measurement will you use? Personally, I do make that adjustment and simply use the CPI-U measurement of inflation over the time I owned the investment.
Donor Advised Funds, Charitable Trusts, and Private Foundations
What if you donate appreciated shares to a Donor Advised Fund (DAF), charitable trust, or private foundation? Should you pay tithing on the increase in value of the shares even though you didn't have to pay taxes on it? I think you should.
What about any increase in value that occurs within the DAF, trust, or foundation? Is it still your money, or have you given it away? Does that change if you want to pay your tithing with a donation from the DAF or foundation? In my opinion, you've given it away so you should no longer pay tithing on any gains or take any tithing deductions on any losses. If that's the case, it probably also means you can't get out of your tithing obligation the rest of your life simply by donating from the foundation you control. However, if your DAF is simply your conduit to pay the tithing, I think that's fine.
Trusts, Corporations, and LLCs
A revocable trust is basically still your money. You should probably still pay tithing on any income you get from there. However, with an irrevocable trust, the money is no longer yours. I would argue you are no longer responsible for paying tithing on it. I would argue tithing is a personal commandment and doesn't apply to entities like corporations or trusts. When you take a salary or distribution from a corporation or other business, then you should pay tithing on it. But if you're reinvesting in the business, I would argue that money should not be tithed, even if it is a pass-thru business (sole proprietorship, partnerships, S Corp) requiring you to pay tax on that reinvestment. You can pay tithing on it all when the business is sold. The recipient of the irrevocable trust should be responsible for paying tithing on those funds.
However, it gets even more complicated when YOU or YOUR SPOUSE is the beneficiary of the irrevocable trust. The first happens with a Domestic Asset Protection Trust (DAPT), and the second with a Spousal Limited Access Trust (SLAT).
If you put a valuable family business into the trust, do you get a “tithing credit” for its value? Do you take the “real value” or the appraisal done to show the IRS the business is not that valuable? If the trust is a grantor trust (meaning you are paying the taxes due on any assets in the trust), what do you pay tithing on? Do you pay tithing on all of the income in the trust? What about capital gains in the trust? What if that is more money than you even have outside the trust? How about if the trust bought your assets with a promissory note? Do you pay tithing on the income in the trust, the interest on the promissory note, or both? What if the promissory note is owned by another trust? Does it matter how much of the trust money you expect to use yourself, how much you expect your spouse to use, how much to go to heirs, and how much that goes to charity? I'll be honest, I'm still wrestling with this one.
Inheritances
What should you do with inherited money or assets? What if you would have to sell the family farm just to pay tithing on it? Does it make a difference if the person who gave it to you has already paid tithing on it? Do you get a step-up in tithing basis at death? All great questions; no definitive answers. It's certainly easiest to assume a step-up in basis at death. If you decide that you should pay tithing on it (and I'm not sure I've even decided what I would do in this situation), then I think it's also reasonable to wait until the assets are sold before paying tithing on them.
Gifts
What about gifts? Do you pay tithing on the birthday money you received as a kid? Does it make a difference if the gift is cash or a present? Does it matter if the person who gave it to you is a tithe-payer or not? Birthday money isn't much of a tithing bill, but what if your parents are gifting you $32,000 a year? Does that change things? How is that different from an inheritance? Personally, I ignore gifts for tithing purposes as long as the gifts are small. If they're large, I would treat them the same as you plan to treat any inheritance received.
Now, how about if you are the one on the giving end? Does it matter if the recipient is a tithe-payer or not? If you're putting money into a UTMA account for your kids each year, should you take a tithing deduction for that money? Personally, I think you should, but again, I think it's important for you to be consistent in your life. If you plan to pay on your own inheritance, then I think it's reasonable to take a deduction on your gifts and vice versa.
Stock Options
What if you are paid in stock options or directly in equity? Does it matter if they're incentive stock options or non-qualified stock options? What about profit interests? Should you pay when you receive them or exercise them? Personally, I think it's reasonable to not pay until you have cash in hand, just like you wouldn't pay until you sell a stock.
Charitable Donations
Do you get to take a tithing deduction (or even a credit) for money donated to charities other than the church? I would argue no; that those donations are on you.
Tithing Is Between You and God
I think you can now appreciate the wisdom of the first principle I put forward above—that how much you pay in tithing is between you and God. There is no “tithing code.” If there were, it would likely be just as long and complicated as the Internal Revenue Code! Your ecclesiastic leader may not even ask you if you are a “full-tithe payer.” If you feel right about what you've paid, then feel right about what you've paid.
How Often Should You Pay Tithe
I think most people grow up assuming they should pay tithing every time they are paid. That might mean 12-24 payments a year. But what if you have multiple streams of income? Are you really going to pay every couple of days? Seems really time-consuming. Certainly, people who struggle with budgeting should pay more frequently so they aren't tempted to spend their tithing money, but I don't believe God blesses you any more for paying 12 times a year than for paying once a year. You could pay at the beginning of the year or you could pay at the end of the year or you could pay once a quarter. All are fine. Personally, we've paid less and less frequently as time goes on. I think if you're paying less frequently than once a year, you probably need to reexamine this. But in my opinion anything up until that is probably fine.
I suppose someone could even make a reasonable argument that they're just going to leave their entire estate to the church and pay their tithing as their final bill. The heirs might not be too happy, and it might be that you end up paying just 5% or “overpaying” by paying 20%, 30%, or more of your lifetime income. I guess I wouldn't recommend that approach. It's supposed to be 10%; otherwise, it's just a crapshoot. It also seems to go against the spirit of the law if you're only paying using money you didn't need or want to spend as you went through life. In reality, you're paying it using your heirs' money.
How to Pay Tithing
Finally, we're left with the dilemma of how to actually pay tithing. Well, if you're going to pay it, you might as well maximize any tax benefit you may get from it. Tithing is generally tax-deductible for anyone who itemizes, as most churches are registered with the IRS as 501(c)(3) non-profits. If, like most people, you take the standard deduction, maybe don't worry too much about this. But some people who would take the standard deduction if they were to pay their tithing once a year might consider “bunching” their tithing. That is, paying double tithing every other year. You can pay for the previous year on January 1, then pay on December 31 for this year. You would itemize every other year. I doubt God cares that you paid one day late, but doing so may allow for a significantly lower overall tax bill.
The best way for retirees over 70 to donate to charity is to use Qualified Charitable Distributions (QCDs). This money comes directly out of your IRA or 401(k) to charity without being taxed by either. If you are 72+, the amount of the QCD is subtracted from your annual Required Minimum Distribution (RMD). This allows these retirees to still take the standardized deduction and avoid paying taxes on the money used to pay tithing.
If you're not yet retired, my favorite way to pay tithing is to transfer appreciated shares to the charity. If you itemize and have owned the shares for at least one year, you get to take a charitable deduction for the full value of the shares on the day of the donation. However, neither you nor the charity has to pay capital gains taxes on those appreciated shares. Combining these donations with tax-loss harvesting is a very powerful tax-saving technique that can allow you to basically never pay capital gains taxes.
Many churches, however, struggle with the receipt of appreciated shares. Not only can it be a hassle for you and them, but it also lets your fellow church members know about your financial status. If you prefer a bit more anonymity and less hassle, consider using a Donor Advised Fund. You can simply donate the appreciated shares to the DAF where they are sold for cash, and the charity receives a check. It's up to you whether you tell the charity if the money is from you.
How to Donate Appreciated Shares to The Church of Jesus Christ of Latter-day Saints Without a DAF
I had a reader recently send me this step-by-step guide:
- Log in to Vanguard
- Search for the form “Give Shares or Securities to an Individual or Organization,” and open it
- Select “Complete online”
- Check box for “I Accept” and select “Continue”
- Check “Yes” when asked if you want to continue and click “Next”
- Select “Existing Vanguard nonretirement account”
- Click “This link” to continue with request
- Check “Yes” when asked if you want to continue and click “Next”
- Choose your account from the dropdown menu when asked to “Choose a nonretirement account to gift from;” then select “Next”
- If the information looks correct, select “Yes” and click “Next”
- Select which assets you wish to donate
- Are you gifting to a charity, click “Yes”
- Is your gift valued at over 1 million, click “No” (Not sure what happens if you click “Yes”)
- Name of individual trust or organization: Corporation of the President of the Church of Jesus Christ of Latter-day Saints
- Account number: 09889660840
- Review and submit
At this point, it will fill out a DocuSign document that you will need to e-sign, then you should be done. The Tax ID number is 23-7300405 if you need it.
I then send an email to [email protected] that reads something like this:
We made the following donations-in-kind through Vanguard:
8-20-2021 tax lot of VTSAX: 100 shares
10-18-2021 tax lot of VGSIX: 80 sharesWe have instructed that the shares be transferred to the church's account 09889660840. We would like it apportioned $1,200 to fast offering and the rest to tithing. Please send us a tax receipt, and inform us if anything else is required.
Thanks,
name
phone number
address
Ward, Stake
Tithing and Financial Planning
Want to go down the rabbit hole even more? Consider the effects of tithing on your financial decisions.
First, you'll have to make decisions about all of the factors above. Then, once you have done that, you may find that it changes how you live your financial life. Retirement accounts, HSAs, 529s, and UTMAs become even more attractive since you can fund them with pre-tithing dollars. Churning your taxable account becomes even more costly. If your heirs will take a step-up in basis on tithing, then there is even more incentive not to sell an asset prior to death. If you don't pay tithing on your health insurance, you're incentivized to have a more robust health insurance plan. It's like you're dealing with a 10% higher marginal tax rate, and that naturally affects everything. Maybe you work less or retire earlier than you otherwise would. Maybe you leave more money to heirs that don't pay tithing than those who do. Lots of complexities here.
If you belong to a denomination that follows a strict tithing code, I hope this post has been helpful to you. If you don't, I hope this has been at least somewhat enlightening as to the financial lives of a significant portion of the population around you.
What do you think? What tithing dilemmas did I miss? What have you decided to do about the dilemmas discussed in this post? Comment below!
I am LDS also and gave tithing for many years thinking it went to charity. It was uncovered by a whistleblower several years ago that the church is sitting on ~150b in cash equivalents alone and uses it’s tithing to pay it’s top leaders and further it’s stock and real estate interests. Almost 0 goes to humanitarian efforts. I now give 10 percent to charities that I think do more good in the world and call it good on my tithing and bishop has been ok with it. Like Dr dahle said it’s between you and God so if you feel uncomfortable giving your money to be used to help more rich people then please give to the poor instead!
My understanding is the Church takes in about $7 billion a year and pays out $1 billion a year in humanitarian projects (3,000 projects with 2,000 partners in 142 countries according to this article: https://www.deseret.com/faith/2020/2/24/21151386/latter-day-saint-charities-mormon-church-lds-tithing-donations-finances-humanitarian-aid-2019.) A big chunk of the rest of the $7 billion goes to building and maintaining 17,000 chapels, 265 temples, 18,000 wards and branches, and a robust missionary program. Where did the $100 billion come from? That’s what happens when you spend less than you bring in and invest the difference in some reasonable way. It took the church 77 years to get out of debt and it has now been in the black for 115 years. I guess that given there are pushing 17 million members I’m not too surprised its “endowment” is about the size of Harvard’s and Yale’s combined, especially given market returns over the last decade.
I think it’s pretty clear when one pays tithing that the money is mostly going to running the church’s operations, not running a humanitarian organization. The rule is “10%”, not “what the church needs”. I wouldn’t expect there to be a tithing holiday for a few years while the Church spends down its endowment.
Should more of that endowment be going to humanitarian causes? I have no idea. Above my pay grade. If you’re a believer, take it up with God. If you’re not, why would you pay tithing anyway?
It’s your money, do what you want with it. If you’re a believer, you know you’ll be accountable to God for what you do with it.
Yeah I know it requires money to operate buildings etc. And I thought this was where my money was going However at this point it can operate solely off interest from it’s investments for a long time.
A report on the finances was done this past year
https://widowsmitereport.wordpress.com/
And I essentially realized what I was donating was not ending up where I wanted it to but I still wanted to give. But i guess to why donate at all if I’m not really following the official law of tithing is a good question I don’t have an answer for you except that it made me uncomfortable when I read the financial report
I’m reminded of the statement printed directly on the paper and online donation slip…
“Though reasonable efforts will be made to use donations as designated, all donations become the Church’s property and will be used at the Church’s sole discretion to further the Church’s overall mission.”
Giving money to the charity of your choice may make you feel better, but it is not tithing. I’m surprised that any bishop would be “good” with that. If someone truly has a testimony of the gospel then they will understand that the Lord’s servants, under the direction of the Lord, will determine the best ways to spend that money. I have been in many meetings where the matter of how to use sacred tithing funds is discussed. I have watched church leaders prayerfully consider how best to use those funds.
When we pay our tithing we recognize that our income, as well as our other blessings, come from the Lord. I feel it is rather presumptuous for us to think that we know better than the Lord how to spend our tithing funds. It is His money. not ours.
I don’t mean to be rude, but I suspect that if you have a problem with how your tithing money is spent, you likely have other issues with the church.
If you think that all of your tithing money will only go to humanitarian efforts then you are mistaken. That has never been taught by church leaders. We have all been taught that tithing funds are used however the church sees fit. Much is given out in emergency aid and humanitarian efforts, but most is used in construction and maintenance of church buildings and temples, missionary work, church colleges and universities, the church educational system of institutes and seminarie, etc. All branch, ward, and stake programs and activities are paid for with tithing funds. There are many other things I could list. All these things cost money, a lot of money.
Again, the bottom line is that it all comes down to a person’s testimony. Do they have a testimony of the gospel? Do they have a testimony of the prophet and other leaders of the church? If they do, then they’ll trust that their tithing funds will be used properly, as the Lord sees fit.
I hope that at some point you’ll find peace with whatever issues you have with the Church.
In the past, when I’ve thought about tithing and got down in the weeds, it always seemed complex and too many what if’s. But wow, your blog really did a great analysis of all of the what ifs!
I’d simplify it to give as much as you can just to the point it starts to hurt. That would be a variable percentage for everyone. If it requires a sacrifice, to me, then it is charity.
As the first comment points out, it’s not only how much you’re giving but also knowing where it is going and what the money is being used for. I prefer to give as directly as I can to a recipient that I know what they are going to use the money for.
I love the give till it hurts mentality…it’s practical and gets to Jesus’ heart of generosity…how much the woman with two coins kept versus how much the rich man gave. Like you, we have learned to focus on WHERE the money will do the greatest good to change the world most through generosity. We created blessbig.org with experts from around the globe to address where our tithing goes to most reliably have sustainable impact for the world and for God. See my post in this thread for more that I think we both resonate with.
Have a good weekend!
Here in Alabama this progressive considers some political donations as charity for my fellow Alabamians whose life will be improved by better governing. Don’t bother arguing this with the IRS LOL.
There IS a charitable near lobbying (my women’s group has kittens when I use the term for work our 501c3 does, they barely tolerate ‘advocacy’, but actually ‘lobbying’ done for your group’s charitable cause is fine so long as it isn’t recommending a party or candidate) group provocatively called Alabama Arise which more effectively (than my contributions to Democrats here) works on our current politicians.
And one year I donated monthly to the UNCF as a gift to Mom and am too lazy to sort out how to stop it- I tell spouse it’s reparations when I want to start a debate.
Sadly I’m sure we get nowhere near 10% – this article is food for thought.
“I tell spouse it’s reparations when I want to start a debate.”
Low-key the funniest statement I have ever read on a financial site.
Just out of residency and this is a fascinating article. Half this stuff never even crossed my mind because I’m not there yet with the complexity of investments. Thanks for being open to writing about this. Very helpful. One thing I would have like to have seen included is real estate. When you sell your home or other personally owned real estate? Pay on appreciation only? Do you take into account inflation? The total amount you make from investment properties after expenses, ie positive cash flow only or total amount coming in ie rent etc?
This was the sentiment of my thoughts as well. New attending, and we don’t yet have all these complexities. And I’m not sure I thought of giving from anything more than my income.
Just a few other thoughts that came to mind:
1) I believe I will tithe off investment and retirement accounts when I realize the gains (ie take a distribution) since that will be “income” at the time
2) From a biblical example (1 Corinthians 16) church giving is done on the first day of the week, which sounds like it is intended to be an ongoing practice and reflective of that week.
3) when I was spending my 529 money I did not tithe it because that is not an IRS approved use of the funds. My other funds at the time were student loans, and tithing is not an approved use of student loans either.
Seems appropriate to me to consider inflation, but I wouldn’t pay on appreciation until you sell. I’d probably pay on net income as I went along.
There was a study done some years ago that explored how members of the LDS church felt about various tithing-related scenarios. One thing I found interesting is they found little evidence of biased self-serving behavior (e.g. are people who have actually received large gifts less likely to say they would tithe on those gifts than people who haven’t received such gifts?). As they say, however, “The one outstanding exception to the lack of self-serving behavior shows up with housing capital gains…Respondents who have never owned a home are up to 20-percent more likely to believe that tithing should be paid on the capital gain [than those who have owned a home].”
https://www.researchgate.net/publication/4980860_Does_Where_You_Stand_Depend_on_Where_You_Sit_Tithing_Donations_and_Self-Serving_Beliefs
People study that? I guess publish or perish.
Wow that is real work trying to keep up with all of that. I don’t have a church requirement, just trying to be a good neighbor and citizen.
I wasn’t able to quite follow the reasoning that if the contributions are counted in the tithe, that then the withdrawals aren’t. Wouldn’t gains be income? (SS, 401k…)
While I did initially tithe to a church, over time more has gone to support programs for low income families, and less to church budgets. I have found that if I have any struggle it is keeping giving to 10%, maybe that’s where the idea of Zakat comes in? I will have to read about it, using wealth along with income as a guide to charity. The needs are so great and (like probably most who follow your blog) we are able to give.
In fact probably my top downside to my early retirement was the substantial decrease in our giving.
And I would add that for me the standard of 10% giving was for before reaching FI.
As far as I’m concerned any wealth above FI is unnecessary and had much better use elsewhere.
Using the biblical metaphor, once my silo is full what profit is there in building more? What a blessing to assist those who have not been included.
We tithe on gross income. We do not tithe on inheritance, my parents tithed on that already and it did not represent an increase, it was merely a transfer of stewardship within the family. In retirement I have no idea what % of our income drawn from investments was already tithed on, what represents inflation corrected (true) growth. So we tithe on half of what we spend, just assume that’s approx correct. Soon most of what we spend will be Social Security. Half of that was funded by money we already tithed on. Plus we give above the tithe. The math to adjust for all this is just too complex, so we are sticking with half of what we spend as our growth to tithe on.
This was a fascinating read, Jim. I have never thought about 75 percent of the tithing questions here, and I’m a money nerd!
For most people—even financially savvy ones—considering so many specifics may be “too much.” But it’s worth considering. I am grateful you started with the most important principle: “If you’re unsure what to do, pray about it, decide between you and God what is reasonable, and pay that.”
This post will add to some of the wide-ranging dinner discussions we have in our family on this topic. We have also talked about Andy Hill of Marriage, Kids, & Money and his family’s practice of giving five percent to church and charities, and five percent to friends, family, and local individuals in need. And we have pondered the subtitle of Amanda and Jonathan Teixeira’s soon-to-be released book about personal finance— “(how to) change the world through generosity.”
Your insights are great Nancy :). We have learned to first ask WHERE the money will do the greatest good to change the world most through generosity. We created blessbig.org with experts from around the globe to address where our tithing goes to most reliably have sustainable impact for the world and for God. See my post in this thread for more that I think we both resonate with.
Have a good weekend!
What an interesting website, and a good idea, Jason. I look forward to exploring the website more.
Thanks Nancy, have a great weekend!
I agree with your overall points in the article. I also agree the details are between you God. I think your details are more involved than what I personally feel is necessary but I like the overall point. There are some sad statistics out there that the average evangelical family gives 2%. That includes those of us giving more so there are many giving much less. I am not LDS but I bet that percent is better among LDS from what I’ve heard. Think of the difference we could make in the world if that number was closer to 10% or more among evangelical Christians.
The first time the Bible refers to tithing that I am aware of is Abraham in Genesis 14:18-20 where he gave the “priest of God Most High” “a tenth of everything”. He set up the pattern there and it’s referred to throughout the Old and New Testaments and the Malachi verse you cited is particularly convincing. Seems like this would be at least a guide for Judaism as well.
The confusion comes with verses like 2 COR 9:7 about each giving what they had set in their mind to give or similar phrases. Christians often use this to argue this supersedes previous commands to tithe 10%. To me there’s a reason verses like Malachi talk about “tithes AND OFFERINGS”. In my humble opinion, a tithe is what I owe. I haven’t GIVEN anything yet. An offering is what I give beyond a tithe.
I don’t care much how people calculate 10%. The Bible is a little vague on gross verses net or similar questions so i think it’s a question of conscience. I do appreciate you laying out how you do it since it’s a good example. Do gross or net. But don’t do 2% and justify it by saying 10% is Pharisaical. God gave us a nice guideline that anyone is capable of. When I was in college and made $1500, I made sure to tithe $150. I have a record going back to high school of income and giving. It’s fun to see years in HS where I made $300 cutting lawns and babysitting and there’s $35 in giving. I stopped keeping the log when I knew I was comfortably above the 10%.
To me the key is how you look at investing. If you see this world as all there is, maybe you don’t give as much. Matthew 6:19-20 says store up treasures in heaven and not on earth. Yes. We should prepare for the future but at best we live here 100 years. Eternity is forever. What does our eternal treasure look like? I’d like that savings account earning more than my 401k because I’m called to but also because it’s a better investment! To whom much is given much is expected. 10% is fine for med students and residents. It’s not nearly enough for most of us with higher incomes. I don’t worry about calculating my 10% any more since I’m well above it and now typically over 30%. I have friends that give well over 50%. I do use smart tricks primarily donating appreciated stocks so the government supplements my giving.
My plan is that i picked a date I want to be financially independent. I don’t need to be FI now but I have a date. I plan to keep working past that but will be work optional. I know how much I need to save per year to hit that target and can adjust as markets fluctuate. Anything I have beyond that I don’t need and try to give most of that “excess” away (as long as I’ve already covered the 10% that I “owe”). That’s offering. When I become FI I hope to keep working and give more away since I won’t need to save as much. Investing for the eternity beyond retirement.
Pretty impressive to be giving 30% at all, much less before hitting FI.
Thanks. Sounds cliche but it’s not my money anyway, it’s God’s. I think the parable of the talents applies a bit to giving. Obviously that parable is about more than money but I think it applies to money. We are to be stewards with what God gives us. If he gives us one talent, we use that for Him. 10 talents, same. In the church denomination I’m in most of the money we give to a church goes through the local church and its budget locally and agencies and missionaries it supports. Part of being a steward in my opinion is looking at the church’s needs. During training we were part of a couple churches that struggled financially and we have close to 100% of our giving directly to our local church since I think that should be a top priority. When we moved here the local church we joined was well in the black without us so we shifted a lot of our giving to agencies we felt needed it more, while still giving some to the local church.
I do think it’s more than just the act of giving. One of the comments above said if the church lights it on fire the point of giving is to change the giver. While I agree with the point to some degree that God could do it without us and chooses to use us, we do have a responsibility to give wisely and have an impact. I’m not going to weigh in on LDS specifically because I don’t know anything about it’s budget apart from what I’m reading here and I don’t judge anyone giving 100% directly to the church but I also dont judge anyone giving 100% to other causes apart from their local church if they believe it’s a better use of the money God has blessed them with.
I have no affiliation with this website but have found it helpful. They vet agencies and only recommend ones with very low overhead where the money you give goes much more directly to the cause. https://blessbig.org
Anyway I bet you didn’t see it coming but I suspect this might be one of the most read and commented on posts of 2022.
I’d love to see any post on giving be the top post of the year. It’s got a long way to go though!
Thanks for weighing in with your thoughts.
Fascinating read. I understand this article is focused on “how much to tithe”, but the topic of tithing sparks so many questions.
No matter the religious affiliation, where does all that money go? Who manages? Who decides where it is allocated? Is there oversight? Is all this irrelevant because “Not only will the believer be blessed for doing so, but the tithe-payer will better remember the role of money in their life, keep it in its proper place, and develop a stewardship mentality.” Basically, it’s not yours anymore, so the personal religious requirement/expectation is met regardless if it’s used in a positive manner (subjective?), burned, put in a bank forever? Are these questions even permitted within each organization?
It’s understandable why this topic has not been posted before. I had no idea it could be this complicated! That said, religion topics (and crypto!) definitely spark conversation. Interesting stuff. Thanks again for posting.
Your questions are so good and relevant CD! We created blessbig.org with experts from around the globe to address WHERE our tithing goes to most reliably have sustainable impact for the world and for God. See my post in this thread for more that I think we both resonate with.
Have a good weekend!
Thank you very, very much for creating this post. Will be referencing this frequently over the years.
Another consideration becoming more relevant all the time right now is, what about student loan forgiveness? While PSLF is non-taxable, I would call it a literal “increase” in your net worth.
I’ve decided with my wife to pay 10% of (gross – retirement contributions) with the plan to tithe on that money when I take it out. Still only have W2 income so I haven’t had to consider a lot of the questions you posed. A very interesting read. At a certain point with this complexity I feel like I’m nit-picking God and… That just feels inappropriate.
Interesting. Had not thought about that one. I’d probably argue the opposite though. I didn’t pay on the value of my education that the military paid for; didn’t even think about it. Nor my undergrad scholarship (although to be fair, we’ve paid a whole lot more into that scholarship fund than we ever received).
I agree with the sentiment about nit-picking, but what else is one supposed to do about all these issues other than decide about each one individually.
Interesting, insightful post. It saddens me that some of your readers will get worked up in a frenzy over this.
We’ve personally sought to increase financial generosity year-to-year, percentage wise due to income fluctuations. We are absolutely blessed, but there’s always so much need in the world!
Hi Jim, interesting subject. Here in Europe most people belong to catholic or lutherian church. In most countries you have to pay a kind of tax, usually a certain amount of your income tax to your church.
As i am catholic, i have to pay a much lower tax in Austria than in my native country, Germany. I decided to donate the difference to medicins sans frontiers. My plan consists of increasing the donation to MsF each year by 10-25% or at least the same rate my retirement account ist growing.
As you said: It is all between you and god!
Great blog, interesting views into a great country. And helped me a lot to my personal finance ahead.
Best wishes
Medicus
Interesting that it is a formal tax in Europe. It always feels less charitable to me when it is mandatory.
Non-believer here who enjoyed this surprisingly interesting post. We’re working up to 10% secular equivalent in charity. While churches aren’t perfect, it’s probably better for theists to tithe than not give at all, but just my opinion.
Hey, if you’re interested in maximizing your impact via secular giving, check out blessbig.org or givewell.org. Maybe you’re familiar with them already, but they can make your giving much more impactful very easily.
Thanks for a thought provoking post. As a Presbyterian (PCUSA), our beliefs are different and I appreciate hearing other views on charitable giving.
What does PCUSA advise for tithing/ church and charitable donations?
It’s not that different – 10% of “income” however you define it to the church is preached/recommended, and any additional giving is icing on the cake. Sadly most protestants don’t even hit the 10% mark…
https://www.presbyterianfoundation.org/calculating-your-tithe/
https://nonprofitssource.com/online-giving-statistics/church-giving/
“The average giving by adults who attend US Protestant churches is about $17 a week.”
Thanks James,
This is great rundown of how to think about tithing, given different situations and vehicles. I’m a radiologist who has spent many years with experts all over the globe assessing how to define what we give and where it has been independently and consistently proven to make the greatest impact. I loved reading this! An assumption in the blog that I would appreciate anyone’s discussion on though is why whatever is “tithed” should simply go to a local church. The Torah’s description of the tithe and the New Testament Church’s similar practices don’t resemble anything like a gift devoted only to a local congregation, especially one that is already very over-served compared to the congregations of our global brothers and sisters.
First, such gifts were gathered centrally in towns (Deut. 14:28) or centrally in the whole Church (Acts 4:34-35), not in local groups who often use their finances to compete with each other. As in these passages, this was clearly to make the recipient pool large enough so that the relatively under-served were included and prioritized – no relatively rich getting richer.
Second, the Levites were only one of four groups who got the tithe (Deut. 14:29), and even they represent ANYONE who depends on support to do the work of God (non-profits, missionaries, parachurch initiatives etc.), not just church staff. The majority of the tithe was to go to the alien, the fatherless, and the widow (Deut. 14:29 ) – “distributed to anyone as he had need” (Acts 2:44-45, 4:34-35). Contrast God’s Word with the the fact that US churches spend – on average – only 10% of their budget on domestic/international missions/aid. Only 10% on people in need and 90% on admin, fundraising, and facilities, per Christianity Today. That’s kind of the opposite of the biblical mandate, and virtually every non-church non-profit gives much more of their budget to people in need than churches.
Third, our giving is to prioritize those in need globally, not just in an extrachurch recipient pool like a town. The Macedonian church raised money solely for people they’ll never even meet in the Jerusalem church (Rom. 15:25-27). And if there’s any doubt that this was a significant part of their budget – not the mere 5% that churches give internationally today – Paul commands us to have equal concern for every part of the global Body (1 Cor. 12:24-26), not most for the few in your local church and a trickle for the billions of others. Especially when most of those billions have only the tiniest fraction of our churches’ resources to aid their own local community with. Similarly, Jesus spent almost all his efforts on the most neglected, and God’s justice and impartiality would not allow us to do otherwise. Yet – both in our churches and likely in our own giving – it is our local community that gets almost all of our resources and advocacy, isn’t it? Even worse, our local communities have access to government programs, numerous non-profits, safety nets like insurance, and other churches that our global neighbors do not. The result? 95% of both secular and church US donations stay in the US. Even though the US comprises only 1% of those in poverty and far less less than 1% of those unreached with the gospel. No matter how much we end up tithing, we have failed Jesus and his Body in what it actually accomplishes, compared to what it could and should be accomplishing.
Jesus commands us to prioritize the “least of these” (Mat. 25:34-40), who today are almost exclusively outside our local communities. He also commands us to bring the gospel to the ends of the earth (Acts 1:8) and make disciples of all nations (Matt. 28:19-20). And that’s wonderful because it costs literally HUNDREDS of times less to create proven, lasting impact for the least of these in our global Body! We worship the Head of a global Church – not a local church – that we have woefully and fatally neglected. Millions have died and gone undiscipled as a result…and the world knows this of its Christians. In a blissful example of agreement among God’s Word, development/aid scientific research, and common sense, our tithes CANNOT go only – or even mostly – to our local church. Everything about God DEMANDS that they must go where folks are least aided and where money reproduces the most bags of gold (Matt. 25:14-28) to create the most glorifying impact for him.
And it only takes a few minutes to do so. This blog is about how to define the amount of your tithe, and that’s awesome! But no matter how meticulously you do so, the amount you give will never be as important as WHERE you give it. You can only multiply your wealth and donations by tens if you’re lucky. But in mere seconds, by choosing the most robustly-proven places to give, you can easily multiply your impact for God and the world by hundreds – even thousands!
Since my wife and I give over 50% of our gross income away, we have collaborated for many years with global experts on finance, aid, and ethics to recommend and give to the most consistently high impact-per-dollar Christian and secular non-profits in the world. Check out blessbig.org to learn more – it’s a volunteer project that never receives a penny from you or anyone. Spend more time learning WHERE to give than how much to give. When you know the incredible impact your money is having, you’ll find yourself wanting to tithe more…and absolutely LOVING it!
Feel free to contact me at [email protected] to keep the discussion going. 🙂 Thanks James for this discussion!
A few years ago I began to think about the New Testament story about the rich man who didn’t give to the homeless person who lived right outside his door, and this led me to shift my view of charity toward giving locally, rather than toward those large charity groups that dig wells in rural Africa or things like that. Local food banks, local community college scholarship funds, the warm houses fund on my monthly electric bill, things like that.
I can see where you make that connection, but if that is the intended interpretation of Luke 16, then why would it contradict everything else in the Bible (and stats) quoted above? And contradict justice in general?
The rich man didn’t have the internet, ability to freely and instantly transfer money, or any global awareness like we do. And the context of the story is not a comment on where to give, but that people ignorant of giving don’t fare well in the long run.
Besides, giving locally produces far less bags of gold and far less of a crop per dollar than giving strategically abroad. For example, deworming girls in poorly educated areas globally allows 3500 TIMES as many extra years of education per dollar than directly paying for an underprivileged woman’s education in the US at a local college. Would Jesus really want you to sacrifice so much compassion, impact, and upward mobility to give locally, especially when virtually everyone else prefers to do the same already?
It’s easy and extremely important to give objectively and based on the whole biblical commentary, which wonderfully agree that doing so creates does a HUGE amount of good! And who doesn’t want that?
I’m Jewish and broadly speaking, we are supposed to give 10% to tzedakkah, which loosely correlates with “charity” but also is related to “justice.” It’s different than tithing, a term which fell into disuse after the destruction of the Second Temple. Tzedakkah partially but does not completely include gifts one may make to support a synagogue, etc. Giving more than 20% is discouraged. Gross vs net is an ongoing debate, but your article brings lots of nuances that I may explore.
Of note, in giving tzedakah, it is taught that intention/attitude also matters – see Maimonides Levels of Tzedakah (https://www.chabad.org/library/article_cdo/aid/45907/jewish/Eight-Levels-of-Charity.htm) of which, the highest level is giving a gift/loan/job/education to another Jewish person so he will not have to depend on alms and the lowest is giving resentfully.
I love the eight levels. Thank for sharing.
Twenty years ago I wrote my PHD dissertation opposing tithing and published my first book, Should the Church Teach Tithing?
Nobody will dare have an open dialog with me because tithing cannot be supported contextually for Christians.
Leviticus 27:30-34 limits it to FOOD from the holy land of Israel and that description never changes as per Malachi 3:10. and Matthew 23:23.
Numbers 18:20-28 restricts tithe-receiving Levites and priests from owning or inheriting land in Israel. Numbers 18:20 restricts tithe-receivers from amassing wealth.
New Testament post-Calvary Spirit-led giving is freewill, sacrificial and from the heart. Stop lying about God’s Word.
Sounds like maybe you missed the first three paragraphs of the post.
“ Jewish people have something similar to tithing called Tzedakah, but this is more of an optional charitable donation rather than any sort of a strict tithing code that requires the calculation of a percentage of income.”
Just wanted to correct you on this. Orthodox Jews have something called ma’aser which requires us to donate 10% to charity. Not at all optional.
Thank you!
I appreciate your emphasis on how tithing is a personal matter, as there are millions of people with honestly differing perspectives. This is yet another LDS perspective. After being in practice for a couple of years my finances became more complicated for many of the issues that you lay out in the blog. D&C 119 says that tithing is to “pay one-tenth of all their interest annually”. My practical interpretation is to take my net worth on January 1 of each year, see the difference from year to year, and pay tithing on that. I include my retirement accounts, taxable accounts, 529s, my house purchase price, Kelly Blue Book values for my cars (went up this year), cash I have in my pocket, and what I spent on vacations, and then subtract my mortgage, other debts. I do not include daily living costs for many reasons I do not need to evangelize about, but I do live well below my means.
Due to heavy savings and great stock market returns, a couple years ago this method began outpacing what paying tithing on “net” would have been. Last year it outpaced what “gross” would have been.
This method smooths out issues that are mentioned in your blog post. It raises other issues, but I have found solutions I am happy with. It is not for everyone, but works for me.
What will you do if your NW falls one year?
If my net worth falls I would only pay tithing on the things I predetermined I would already pay, like my vacations. I was influenced by some of the guidance the church gave to mission presidents on what they should and should not pay tithing on. As that was a ‘leaked’ handbook others can get make their own decisions.
I would not hold over a negative tithing to the next year.
This method does require a relatively stable economy. If we went through many years of wild swings I would need to rethink this method, as well as much of my financial plans.
That handbook would be interesting.
I looked it up because I thought it would be interesting. Not much there.
“Because you are engaged in volunteer religious service, no employer-employee relationship
exists between you and the Church. As a result, any funds reimbursed to you from the Church
are not considered income for tax purposes; they are not reported to the government, and
taxes are not withheld with regard to these funds.
In countries where a tax return is required, the Church Tax Division or the local
Office of General Counsel can assist you.
To avoid raising unnecessary tax questions, please follow these guidelines closely:
• Do not share information on funds you receive from the Church with those who help you
with financial or tax matters. Any exceptions should be discussed with the Church Tax
Division.
• Never represent in any way that you are paid for your service.
• If you are required to file an income-tax report for other purposes, do not list any funds you
receive from the Church, regardless of where you serve or where you hold citizenship.
Because selling or renting your home can create significant tax issues, seek assistance from a
tax expert.
If you have any questions about tax matters, contact the Church Tax Division, which has tax
rulings and research that support the validity of not reporting as income the funds you receive
as mission president. Because most tax advisers are not aware of this information, their advice
may be incorrect.”
And for tithing, not much there either….
“You do not pay tithing on money reimbursed to you by the Church.
If you have income that should be tithed, you should normally pay tithing to the ward where
your membership records are located (see page 9).
However, if you are serving outside your own country and your membership records are in
the ward where you are residing, you should generally make tithing contributions directly to
Church headquarters. (For questions about contributing tithing directly to headquarters, call
……)
Fast offerings and other contributions may be paid to either the ward where you are residing
or your home ward, as seems appropriate to you.”
Great post! Though not so accurate regarding how Jews give.
Orthodox Jews are supposed to give 10% of their income to charity. It’s a quite complex topic, but on a basic level it’s 10% of your income. Personally I give 20%, as it’s meritous to do so. It’s very common to see ultra HNW Orthodox Jews give close to 50% of their income to charity. Many of my clients use DAFs to simplify the process.
Thanks for the correction. 50% is super impressive, especially if we’re talking about gross.
Is wealth taken into account in any way? I’ve found myself considering the concept of contributing a portion of wealth, not just income.
Of at least considering the growth in assets, which far exceeds my actual income at this point in my life.
Via email:
You are successful because you almost always get your facts right. You missed on this one. Tithing in Judaism has a very strict tithing code and many books have been written in this topic. Tithing depends on taxes, retirement funds, matching, investment losses and so much more.
In fact, tithing comes straight from Judaism. Stick to money stuff and if you want to venture out make sure you have your facts straight or at least hold comment if you’re unsure.
Thanks for all you do. I still love you,
https://artscroll.com/Books/9781578195893.html?gclid=CjwKCAiAo4OQBhBBEiwA5KWu_wcMFS8y4eA4pKBgHPaHJfqoo1-fyfhYFivFKfrFbRfmLNFlUSS3VxoC4wkQAvD_BwE
Except that this IS financial stuff. And if he didn’t talk about tithes and Judaism, we wouldn’t have the opportunity to learn more about it. At least I wouldn’t have because I wouldn’t have even thought to read about it.
When errors are pointed out, Jim readily acknowledges and appreciates the correction.
Offering feedback with solutions >>>> offering only criticism.
Agree. I sent the email and I don’t know why I was so sharp. I apologize to WCI who has taught me so much and saved me financially! Thank you for calling me out.
You don’t have to apologize, much less twice. Now there are lots of people out there who owe me an apology, but I don’t think you’re one of them.
Via email:
I enjoy your podcast and website. Your recent post was inaccurate when it came to Judaism and I thought you would want to know.
https://www.chabad.org/library/article_cdo/aid/4266406/jewish/Maaser-Tithing-in-Torah-and-Jewish-Law.htm
Specifically the section on “Masser Kesafim.” Jews absolutely tithe. And not only money, but also produce (specifically produce grown in Israel).
I’m a simple W-2 earner. I take my paycheck gross (*Give of your First Fruits*), subtract off 401k/IRA/HSA investments and send 10% of that amount to my taxable account each month. I then use a DAF to bunch donations every year or three. That way, Jesus gets the gains from my giving from the brokerage account (or it’s tax loss harvested and I write a check instead), and also the gains when I tithe again on retirement income.
Cheers.
Giving is a great topic for everyone. In a non-religious context, here are some really good discussions on “effective altruism” and the “giving pledge.” Helped me think more deeply about these topics.
https://www.samharris.org/podcasts/making-sense-episodes/228-doing-good
https://www.samharris.org/podcasts/making-sense-episodes/271-earning-to-give
Matt typing it means 1/10 so it should be a 10th of your income The Bible does not allow you to compromise anything less than a 10th.