If a person gives money, services, or property to a church they can deduct the amount of their donation on their Federal tax return.
Every year, billions of dollars of money, services, and property are given to churches. Not only does the giver get a tax deduction for his donation, but the church does not have to pay any tax on the donations it receives.
All churches, by default, are tax exempt. Many people wrongly think that a church must be 501c3 approved to be tax exempt. All a church needs to do to be tax exempt is say, we are a church. (by Sunday at 9 AM I could start a church that would be completely tax exempt by IRS standards, even if only my family attended)
The IRS deliberately steers away from explicitly defining what a church is. In their view, if it looks and acts like a church, it is a church. Here are the main criteria the IRS uses to decide whether a church is tax exempt:
- a distinct legal existence and religious history,
- a recognized creed and form of worship,
- established places of worship
- a regular congregation and regular religious services, and
- an organization of ordained ministers
As you can see, it is very easy for a group to considered a church by the IRS.
Churches are also, in many states, exempt from paying sales tax and real estate tax. Years ago, I bought my cars through the church. This saved me 6% since I didn’t have to pay sales tax on the purchase. Here in Ohio, churches are basically tax-free. It is a huge boon that businesses and civic organizations do not receive.
The question I ask is this. Should church donations be tax-deductible? Should churches be tax exempt?
Christians will quickly state that their church is a charity and it does good in the community so their church should be tax exempt and members should get a tax deduction for their donations.
Relative to the amount of money they take in, do churches really do a great amount of good in the community? Take a look at a church’s budget. Where does MOST of the money go? Salaries, benefits, insurance, utilities, buildings, and programs that benefit the congregation.
If a “real” charity spent their money in this manner, the IRS would pull their tax exemption and donations to said charity would no longer be tax-deductible. Yet, the IRS, and the Federal Government give churches a blind-eye pass.