Tithing Basics

• Tithing is the term for donating a percentage of income to a religious organization, such as a church. These are generally donations that receive no tangible benefits in return. As long as they are made to a qualifying organization -- almost all religious organizations including churches, synagogues, temples and mosques qualify -- the donations can be deducted from your taxable income. Donations are only deductible if you itemize your deductions, rather than taking the standard deduction on the Form 1040 Schedule A.
  
  

Calculating Donations

• That amount of the deduction is limited to the amount of cash and goods that were given in a tax year. Most tithes are strictly cash donations for which the person doesn't receive any tangible benefits. Any donation of $250 or more requires a written receipt from the receiving organization detailing what was given and what, if anything, was received in return for the donation. In some cases, tangible benefits will be received in return for a donation. For example, if you donate $100 but receive a mug commemorating the donation valued at $10, only $90 of the donation is deductible. Any donation over $5,000 requires an appraisal to ensure it's being properly valued.
  
  

Limitations

• The IRS limits the amount of deductions you can take based on the size of your adjusted gross income. Cash donations are limited to 50 percent, property donations can only total 30 percent, with only 20 percent on capital gains. Any excess donations can be carried over to future years, for a maximum of five years. For example, if your adjusted gross income is $30,000 and you give a cash donation of $20,000 to your religious institution, you can only claim $15,000 of that on your current year's taxes. The extra $5,000 could be claimed in the following year. The carryovers can only last a maximum of five years. Usually a tithe is about 10 percent of a person's income, so it won't reach the restricted levels. However, if you're making a significant number of other charitable donations, the limit can come into play.