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IRS Rules For Tax Deduction on Church Donations 2023: Exemptions & Limits

Published: Jan 12, 2024

Why do you need to know IRS rules for church donations? Giving to religious institutions holds a special meaning for many individuals. And these donations play a vital role in sustaining religious organizations. Keeping track of this income – the donations given and received – the Internal Revenue Service (IRS) has established rules to ensure transparency, accountability, and compliance with tax regulations.

Read more: Your guide to building a church communication strategy that works!

This article provides a comprehensive overview of the IRS rules for church donations, offering readers a clear roadmap to ensure their philanthropic efforts align with their personal convictions and legal responsibilities.

Note: The term ‘church’ is not specifically defined in the Internal Revenue Code (IRC). The term is used in its generic sense as a place of worship, including mosques and synagogues. 

Jeff Jacobs from Pixabay

Are church donations tax deductible?

Yes, donations made to churches and other qualified religious organizations in the United States are generally tax-deductible as long as your church meets the 501(c)(3) regulations set by the IRS

Whether or not you actually benefit from a church donation tax deduction depends on your record keeping and if you itemize your deductions. 

Keep in mind: 

Eligible Organizations: Most churches automatically qualify for tax-exempt status by the IRS, but it’s essential to verify the status of the specific religious organization. You can check their status online here.

Itemized Deductions: To claim a deduction for charitable contributions, you need to itemize deductions on Schedule A of your Form 1040 when filing your federal income tax return.

Documentation: It’s crucial to keep proper records of your donations, including receipts, bank statements, or written acknowledgments from the church or organization. As per the IRS– 

  • For any donations of $250 or more, you must receive a signed acknowledgment of the donation from the organization.
  • For non-cash donations, you must determine the fair market value of the item being donated. 
  • If you donate $500 or more, keep a detailed listing of items and complete Form 8283
  • If you donate a motor vehicle, obtain Form 1098-C from the organization.

Read more: 15 brilliant church event ideas for your next event [2023]

This is just some general information. Visit the IRS documentation Publication 526 here for more information. 

Limits: There may be limits on the amount of charitable contributions you can deduct, depending on your adjusted gross income (AGI) and the type of property or cash donated.

The amount you can deduct for charitable contributions is generally limited to no more

than 60% of your Adjusted Gross Income (AGI). 

If your total contributions for the year are 20% or less of your AGI, you just deduct it entirely. But as your contributions get higher, the limits for deductions get very complicated. You can look at them in this document – Publication 526, Charitable Contributions. However, it is best to use a tax specialist to determine your limit. 

The IRS has a helpful tool to check how much you can deduct. Look at the ‘Can I Deduct My Charitable Contributions?’ tool here

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Are tithes considered charitable donations?

From a religious perspective, tithing is often viewed as financial support for the church or religious organization. From a tax standpoint in the United States, you get a tithe tax deduction if the religious institution qualifies as a tax-exempt organization under section 501(c)(3) of the IRC.

To support the deduction claims, keeping accurate records of tithes, such as bank statements, canceled checks, or written acknowledgments from religious organizations, is essential.

IRS rules for church donations see tithes as any other donation, and the same rules apply. 

Is tithing tax deductible?

Remember that the IRS and the tax courts do not see tithes as a compulsory expense by the taxpayer. So there is no specific ‘tithe tax deduction.’ As such, it is treated as any charitable donation and no different regarding exemptions, limits, deductions, etc. 

You cannot claim a higher deduction than your limit by stating you have a religious requirement to give a tithe to your church. It counts just like any donation made to the church. If you want a deduction, you must keep a record of it, like any donation. 

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What are the limitations on annual church donations?

There are no legal limitations on how much you can donate to a church in the United States. You can donate 100% of your yearly income to any church. However, there are limitations on how much of that donation you can claim as a tax deduction since you will still have to pay federal tax on your gross income earned in a year. 

Broadly, you can make deductible charitable contributions up to 60% of your adjusted gross income. Beyond that, IRS rules for church donations do not offer you any further tax benefits. 

You will need to itemize your donations. Strict record-keeping is essential. Depending on the donation amount, you typically need proper documentation such as receipts, bank records, or written acknowledgments from the religious organization.

You will only benefit from itemization when your deductions exceed the Standard Deduction for your filing status.

Should I register my church for tax-exempt status?

What organizations are not required to file Form 990 every year? The answer is churches. Churches that meet the requirements of IRC Section 501(c)(3) are churches exempt from taxes automatically and are not required to apply for tax-exempt status from the IRS annually.

Those requirements are – 

  • An organization must be organized and operated exclusively for exempt purposes set forth in section 501(c)(3)
  • None of its earnings may solely benefit any private shareholder or individual
  • The organization is not an ‘action organization’ – attempting to influence legislation as a substantial part of its activities. 
  • It may not participate in any campaign activity for or against political candidates.

Although there is no requirement, many churches seek recognition of tax-exempt status from the IRS to assure the public and donors about related tax benefits. 

You can apply for tax-exempt recognition under IRC Section 501(c)(3) using Form 1023.

Read more: 5 steps to building a fool-proof church social media strategy

What do donors need from your church to claim tax deductions? 

Donors generally need specific documentation from the church to claim tax deductions for their contributions. Here are what donors typically require:

Acknowledgment or Receipt: Donors should receive a written acknowledgment from the church for contributions, stating the amount of the donation, the date it was made, and a statement confirming that the donor received no goods or services in return for the contribution (or a description and good-faith estimate of the value of any goods or services provided).

For sums below $250 in total in a taxable year, you can give your donors a general letter of thanks. But you must provide an official receipt if the amount exceeds $250. 

Non-Cash Contributions Documentation: For non-cash contributions (such as donated goods or property), donors need a church receipt detailing the donated items and their fair market value. The fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell.

If the donations exceed $500, remind your donors to file Form 8283 to report noncash charitable contributions.

Annual Contribution Statements: Some churches provide donors with annual contribution statements summarizing their total yearly donations. While the IRS doesn’t always require this, it can be a helpful document for donors to keep for their records.

Tracking all offline donations and sending a receipt or a thank-you can be too difficult for your church. It may be easier for your church to shift most of your online donations. 

Using systems like Workflows, you can automatically set up receipts to be sent to your donors after every payment.  

Avoid manual, repetitive tasks by automating nurturing journeys. Learn more about Workflows and automation. 

Luna Lee from Pixabay

Do I have to report donations to my church to the IRS?

You generally do not need to report donations to the IRS. However, you must keep accurate records of your contributions in case the IRS requests documentation or in the event of an audit.

You can itemize your deductions on your federal income tax return and claim deductions for donations made to your church. 

We hope these FAQs have helped you understand how your donations can be compliant with the law. It’s important to note that tax laws can change, and it’s advisable to consult with a tax professional or refer to the latest IRS guidelines for the most up-to-date and accurate information regarding church donations and tax deductions.

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