Q A few years ago, I opened an account with a brokerage service and have consistently been depositing a portion of our savings into it. I would like to tithe on the income earned, but am unsure as to whether I should tithe on the increase today, or if I can wait until a future date when the investments get sold. Any observations?
A I am impressed by your commitment to tithing! Many would not even consider giving from their increase in savings or investments at all.
Generally speaking, our charitable giving should be based on our increase, and certainly interest, dividend and capital gain income are part of our increase.
We read in Proverbs 3:9-10, “Honor the Lord with your substance and with the first fruits of all your produce; then your barns will be filled with plenty, and your vats will be bursting with wine.” While you can get into a debate as to whether this means income before or after taxes (gross or net), we know we should strive to be as charitable as possible.
My pastor captures the essence of our call when he says, “perfect charity is infinite.” You have already recognized this need to give based on your increase, but are questioning whether it needs to be given now, or if you can delay it until you “liquidate” your investment. Here are a few items to consider:
On the one hand, there are always current needs within both the Church and society at large that we should keep in mind. There is merit in giving today to help feed someone who is hungry, or meet some other temporal need. There is also a great need to re-evangelize much of the world, and giving resources today so that this new evangelization can be accomplished is also good. So with these thoughts in mind, it would certainly be a good thing to make a current contribution out of the increase in your investments.
On the other hand, if the account is a retirement account, and there would be penalties associated with a distribution, it is certainly reasonable to wait until your retirement years when the distributions are made in order to pay your tithe.
If you fall into the first category, and want to give of your increase today, remember that there are tax advantages associated with giving appreciated properties as opposed to cash. In short, if you sell a portion of your stock in order to make a charitable contribution in the form of cash, you'll have to pay the applicable capital gains taxes.
As an alternative you can donate the property directly to the charity. While you are still able to deduct the full market value of the gift, neither you nor the charity (assuming it is a qualified tax-exempt organization) will have to pay a capital gains tax.
God love you!
Phil Lenahan is executive director of Catholic Answers.