One of the most common types of charitable donations made by Americans every year is donations to their church.
There is a wide variety of different religions that are practiced within the US and what a lot of them have in common is encouraging charitable donations.
These donations are usually put towards helping run the church and its location, or a charitable cause the church is donating on the behalf of its followers to.
With tax season always feeling like it is just around the corner, something many Americans wonder is if these religious donations are deductible, or partially deductible when it comes to filing their tax returns.
Some Americans can donate significant amounts every year and these donations could end up being a significant portion of their yearly spending.
For these people the question of how deductible these donations could be is very important.
This article aims to make clear the relationship between the church and taxes, especially when it comes to the donations that are made by its followers and how deductible they could be.
If you or someone you know makes significant contributions to a church, and you do not know how this could affect your tax return, keep reading to know just how these contributions will affect your tax return.
The Qualifications Of Your Church
To learn whether your charitable contributions to a church will be tax-deductible, you will need to know if your church has the qualifications to be officially recognized by the IRS.
Because if your church is not recognized by the IRS, there is no chance that your church contributions can be deducted.
If you want to know if your church is eligible for tax deductions you can consult your local church leader, or a tax professional.
However, if you want to save this process, you can consult the list of following qualifications to see if your church falls under them.
Your church is going to be receiving an automatic tax exemption if it meets the minimum of the following requirements:
- The church must be organized and operated with the exclusive purpose of religious and educational practices.
- The religion must not have any significant influence over local or national legislation.
- The church must not intervene with any political campaigns.
- The religion is not allowed to be involved with any illegal activities.
- The church must not also violate any fundamental public policies.
A lot of these requirements basically just describe how any church functions and does not exclude many major religions, and if it does exclude some they may not primarily function as a religion.
It is good to know that your church has filed for a tax-exempt status as it helps with 2 important factors.
These factors are; having tax-exempt status helps boost the confidence of any potential church donors, and it will aid in state tax-exempt status.
If you are part of a church with a tax-exempt status, it will greatly aid with giving donors a larger peace of mind and help them feel confident in their contributions to the church.
It will display that the church has a proper official recognition and will of course make it so there is chance that the donations to this church will be tax-deductible.
When having a church with a tax-exempt status, there could be some factors that impact if the church is eligible for some other benefits, the most significant factors being a state sales tax exemption.
To see what other benefits your church is eligible for, the best thing to do is to check with church leaders or with a tax-professional.
Are Donations To A Church Tax-Deductible?
The question of whether the contributions which are made towards a church are tax-deductible is not a simple question to answer and there are other factors which can influence whether you can get this amount deducted, partially, or at all.
Luckily, generally speaking, you will be able to deduct the church offerings you have made from your tax return, but there are some factors which you should keep in mind which influence the possibility of this.
- These charitable contributions that are made to your church cannot be more than 50% of your ‘adjusted gross income’ (your AGI)
- Your charitable, as well as all of, your tax deductions will need to be properly itemized in your tax return.
- These charitable deductions will need to be made before the end of the current tax year.
When it comes to your taxes, there is a chance that you will not be taxed on all that you are earning or that you are receiving.
The amount you are taxed, for the most part, will rely on your AGI and could potentially be lowered if you have made deductions out of your original income tax.
This could cover your student loan interest that you have paid off, contributions that you have made to a retirement fund, or in this case, charitable contributions to a church.
So as the first point mentions, the church donations can not be more than half of your AGI, so you will not be able to deduct too much in the name of donations made toward a church.
To get the tax benefits which are offered by making these charitable donations you will have 2 choices on how to receive them:
- You will need to fully itemize your deductions
- Or you will need to accept the standard deduction which is given by the IRS
There is another catch as well. To be able to itemize these deductions you will have to have exceeded the standard deduction which is given by the IRS to your filing status.
If these itemized deductions are not more than the standard deduction the charitable donations will not be deductible because they will not be as beneficial as a standard deduction.
As you can tell there are lots of different factors that affect church donations and if they are tax-deductible.
The best thing to do if you are confused is speak to a professional about your personal situation, so you can get tailored advice.