How To Compute Your Tithe

Compute your tithe using your 1040 tax return


Every year at tax time, I have clients who want me to help them compute their tithe so they can plan their charitable giving for the upcoming year.  You would think that computing your tithe would be fairly easy – it’s just 10% of your income.  But sometimes, computing your income for tithe purposes isn’t as easy as it seems.


Before I begin, let me do the quick and easy calculations first.  For some people, your tithe is based on your take home pay.  If your paycheck says $200 – then boom, take $200 times 10% and you get $20 for your tithe.  It’s a pretty easy tithe calculation.


For some people, they want to compute their tithe on their before tax dollars.  It’s a little trickier.  You’ll actually need to see your pay stub and look at your gross income before taxes and other deductions.  So maybe the gross pay is actually $250 on the paycheck – so the tithe would be $25.  ($250 times .10)  The key here is that you have to find your gross pay on the stub first.


But if you’re retired or have investment income, then computing your tithe can be a little more difficult.  Those are the people who usually ask me to figure it out for them. This is what I’ve come up with while working with some of my clients who base their tithe on their entire income.


First, we start with the tax return.  I’ve put a sample return below so that you can follow along.


Compute your tithe using your 1040 tax from.

Here’s a sample federal tax return that we’ll use to determine total income for computing someone’s tithe.


Start with line 22 – that shows the total income.  In this example, we’re looking at $29,223.  But $29,233 isn’t really all of this person’s income.

Look at line 8b – you see that she has $1300 of non-taxable interest income.  So if we want to compute how much she really makes, we need to add that back in.

Now look at line 20a –  the full amount of her social security income is $23,580.  If you look at line 20b, you’ll see that only $6,252 of it was taxed.  So the difference also needs to get added back into the income.  $23,580 minus $6,252 is $17,328.


So, in this example, you’re going to take the total income from line 22, plus the non-taxable interest from line 8a, plus the difference between the taxable and total social security income on line 20 to figure your total income for computing your tithe.  It looks like this:


line 22   +    line 8a +    (line 20a – line 20b)   = actual total income

$29,233   +   $1,300 +           $17,328            =      $47,861

So if you take the $47,861 times 10 percent, you get a tithe of $4,786.  That’s a whole lot more than if you just used your total income figure from line 22.



What about lines 15 and 16 – the IRA and pension distributions?  That depends.  If you have a portion of your pension distribution that isn’t taxable – (like you have with social security)  you would add the difference in the same way you added the difference in with your social security.  But if you merely did a non-taxable rollover, then you shouldn’t include that as income for the purposes of your tithe because you’re just moving your retirement funds around.


What about line 9b, qualified dividends?  What should we do with them?  Nothing.  Qualified dividends are included in the number on line 9a so you’ve already counted them.  You don’t need to add them again.


What you choose to donate and how you choose to donate is between you and God.  This is just a guideline based upon some of my client’s preferences on how they determine their tithing.  You may wish to consult with your own church leaders for guidance.  There is no IRS rule about tithing amounts, although your tithe may be a deduction on your federal income tax.



Charitable Giving 2012

Here is the link to our free donation tracker!


Photo by Sarcasmette on

Good afternoon everyone.  Being my first official blog post, I would like to start off by formally introducing myself—my name is Michael Siebert and I am a recent graduate of the University of Missouri – St. Louis.  I have a bachelor’s degree in Business Administration with an emphasis in personal finance.  My affinity for taxes began when I was a volunteer for the Volunteer Income Tax Assistance Program also known as VITA back in 2010.  One day in November 2011, in search for a tax preparation job, I typed in “St. Louis Tax Preparation” in the Yahoo search bar.  I saw Roberg Tax Solutions as the first link and decided to click and explore.  I clicked the “Contact Us” tab at the top and thought, “Well, I guess I’ll give this a try, but no one answers these things anyway so probably nothing will happen.”  In less than a day, I received a heartfelt reply email from Janice Roberg.  I then thought out loud, “This person really cares about people and their well being.  If she responded quickly to me, she must respond punctually to everyone else.”  And believe me, she does.


We set up a day for lunch, conversed, and from that moment on, I was determined to work for her.  So in the beginning of 2012, I worked for Roberg Tax Solutions part time while working another full time job—to get my feet wet in the compensated tax prep world.  It is now 2013, I am a full time employee, and I could not be happier.  Jan’s dedication to her business, her ability to empathize with clients, and determination to grow are just few of the many facets that make work enjoyable.  I am truly happy to come into work every day.


Alright, enough sucking up.  Let’s get to our topic of charitable giving.  Above is a link to a donation tracker that I made which is free for you to use, disburse amongst your friends and family, or even frame and display in your office if you’re into that sort of thing.  Kidding aside, I am pretty good with Excel but definitely not a guru.  If you see any problems or improvements feel free to leave a comment.  It includes a fair market guide for used items which can save you some research time.  It also includes important little tidbits of information, useful links, and the record keeping requirements for charitable contributions.


Charitable contributions go on your Schedule A if you itemize deductions in place of your standard deduction.  The 2012 standard deductions are:

  • Singles: $5,950
  • Married Filing Jointly or Qualifying Widow(er): $11,900
  • HOH: $8,700


The 2012 additional standard deductions for people age 65 or older, legally blind, per person, per event are:

  • MFJ, QW, MFS: $1,150
  • Single or HOH: $1,450


Are Your Contributions Eligible to Receive Tax-Deductibility?

Use the IRS online search tool, Exempt Organization Select Check:  Or call the IRS at 1-877-829-5500.


Cash Contributions

Contributions made by cash or check go on line 16 of your schedule A.  Boring.  Out-of pocket expenses incurred in performing volunteer work for a charitable organization (including the charitable mileage deduction) are also considered contributions.  If you are reimbursed by the organization, you cannot deduct them on your schedule A.  No double dipping—unless you’re with your friends and the dip is good.  The charitable standard mileage rate is 14 cents.


Contributions that Benefit you—Mr. or Mrs. Taxpayer

If you receive a benefit for a charitable contribution, your deduction is reduced by the value of the benefit received.  As much as I would love to provide examples of this, I have to keep you awake a little while longer to finish reading.


Contributions of Property and One of My Favorite Tax Forms, Form 8283

Yes, I like tax forms.  Jan thinks I am an extreme nerd because of this and she’s probably right.

Contributions of property are reported on line 17, Schedule A.  (Mike, nobody cares about where it goes because the software will take care of it!)  The deduction is generally equal to the fair market value of the contributed property.


An important and common planning tip:  If the fair market value of stock is less than what you paid for it, you could sell the stock, recognize the capital loss, and then donate the cash to the charity rather than give the stock directly to the charity.  This reduces your tax liability more so than if you were to donate the stock directly.


Form 8283 Noncash Charitable Contributions is required when the total value of your noncash contributions exceeds $500. The four methods of evaluating fair market value are the appraisal, thrift shop value, catalog, or comparable sales method.  Most people use the thrift store value for common household goods.  You have to have the Donee tax identification number, the donee street address, the property description, the physical condition, the date acquired, date contributed, your cost, and the item’s fair market value.  They should give you a receipt verifying your donated property that acts as proof for your donation.  Isn’t this stuff fun?


Charitable Contributions Deduction Limitation

The total deduction for all charitable contributions is limited to 50% of the taxpayer’s AGI.  Charitable contributions in excess are carried forward for up to 5 years.  There are also 30% and 20% AGI limitation rules that I will not delve into here.


Donating Your Car

You must obtain written acknowledgement from the donee organization, which includes details on the use or disposition of the vehicle by the donee organization.  A copy of the written acknowledgement must be attached to the tax return.  Check out for more information.


To those of you who made it this far, thank you for reading.  I look forward to writing more blog posts in the future as my skills and knowledge increase.  But remember, the intrinsic value of the donation will always exceed the dollar amount of tax saved. You should feel good about helping needy families!


Here is the link to the donation tracker again.

Charitable Donations: How Much Should You Tithe? Why Do It?

collection plate

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This is one of the most difficult questions I get asked every year. I think most people have heard the 10% rule (donate 10% of your income to your church), but what they’re asking me is, “10% of gross, 10% of net after taxes, or 10% of net after my deductions?” And here’s my classic cop-out answer: “You should ask your religious leader.” I always thought that was safe, and different churches have different opinions. (Although I’ve never heard any religious organization say 10% after deductions – just to be clear.) I always thought that referring it back to the church was a good answer until one of my clients came back at me with, “I talked to my minister first and he told me to ask you.”

For a moment I was terrified. If I got this answer wrong, it’s not like a tax return mistake, it’s messing with God. Screw it up and you go to hell, go directly to hell, do not pass go, do not collect $200. And the reason it was so scary was because for this particular person, I felt that she could not even afford 10% of her net income to go to charity, much less 10% of her gross. (Hindsight being 20/20, I think her minister was pretty much thinking the same thing and didn’t want to make a rule that would harm his congregant.) If we used the 10% after deductions rule then nothing would be going to charity and that wasn’t an acceptable answer for my client. So we sat down and worked out a budget for her church donations. I figured that God wanted her to have a roof over her head and food on the table and we went from there. Her tithe didn’t work out to 10% of her income, but she was happy, I was happy, her minister was happy, and I didn’t get struck by lightning—a good sign.

So, how much should you tithe? If your church doesn’t have definitive rules on tithing, I think 10% of your take home pay is the best answer: ten percent into savings, ten percent into charity and the rest to handle your day to day living expenses. Now, if putting 10% into charity means you can’t put food on the table and maintain a roof over your head then we need to get you to a better financial place first. Donate what you can.

What if I don’t go to church? Even if you’re not donating to a religious institution, the idea of 10% going to charity is still a healthy one. There are thousands of worthwhile charitable organizations that need help. And, for many of us, we have friends or family members that need our charity just as much as the United Way or the ASPCA does. Remember, true charity isn’t always a “tax deductible” event.

If I tithe, what’s in it for me? For some people, charitable donations are tax deductible. That’s the obvious answer from a tax blog, right? But more importantly, I find that persons who regularly make charitable donations tend to weather the difficult economic times better. You could argue that’s because persons of faith have their faith to help them through hard times, and there’s certainly a lot of truth to that. But I also find that even people not associated with religious institutions who donate generously seem to fare better in difficult financial times than people who don’t contribute.

I heard someone suggest that it’s the discipline required to donate part of your income to charity that gives people the discipline to handle financial setbacks. I can’t say for sure. I do know that I prepare a lot of tax returns. I prepare a lot of tax returns for people going through bankruptcy and/or foreclosure. What I don’t see on those tax returns is charitable giving. Now you might say, “But, they’re going through bankruptcy, they have no money!” True, but the charitable giving isn’t there in the years before the bankruptcy either.

It’s only anecdotal evidence; I really don’t have hard numbers. I’ve talked with other tax people who’ve noticed the same thing. Perhaps the old adage is true, when you donate to charity, the person you’re helping the most may just be yourself.