Historically, December has been a month of increased generosity in the church. As the year closes and many people receive Christmas bonuses, church members have an opportunity to give more. Large gifts not only bless the church and community during the holidays, but they can also help donors during tax season.
Over the past two years, the month of March has also become a significant month for giving in the church.
Many factors have most likely played into the increase of March giving over 2021-2022. However, the clearest factors are the rise of retail investing and the fact that tax season is the easiest time to tithe on realized gains.
Unfortunately, churches don’t often provide education on this topic. While they may teach on the wisdom of year-end giving, church leaders don’t typically give investors insights on when to tithe, and when not to.
The following guide can help change that for your church.
The Rise of Retail Investing
The world has changed dramatically since 2019. Nearly all of our daily habits were impacted by COVID, as we learned to work remotely, shop online, communicate from a distance, and more. But the pandemic did more than simply change daily routines. It changed the way we spend money.
Countless millions of people received the same paycheck during the pandemic, but weren’t able to spend their paychecks on the same hobbies. While many struggled financially during COVID, many people also experienced financial increase and found new ways to spend their cash. We even saw skyrocketing sales of lifestyle products, as professionals found themselves with new cash flow–and new hobbies.
In 2014, two apps launched that would change investing forever. These apps were Robinhood, which changed how the world thinks about investing in stocks, and Coinbase, which made crypto investing mainstream. From 2020-2021, Robinhood nearly doubled its userbase (growing from 12.5 million to 22.7 million), and Coinbase grew from 35 to 56 million users.
COVID had poured rocket fuel onto fire, sending these apps–and retail investment–to the moon.
Investing is nothing new. Many of us have saved for retirement with a 401k, Roth IRA, and/or a HSA. With some intentionality, it’s easy to find a financial advisor who can advise you on how to maximize your wealth with investment. These norms have been established for decades. So, what changed in 2014–and even more so in 2020?
The difference was that in 2020, investing as a hobby took off like wildfire. As news spread about the incredible earnings that people were experiencing, more and more began investing into stocks and crypto. The growth became exponential. In only weeks, inexperienced, first-time investors were seeing five-, six-, and even seven-digit returns.
Tithing on Capital Gains
Even ardent tithers may dismiss tithing on capital gains since it’s difficult to understand how to approach it. While an investor may make $100k on an investment, unless he or she sells it, that value may just as easily drop to $75k–or lower–before selling.
Still, as believers, we’re called to tithe. How do we tithe on our investments?
The Journey to 1,000%+ Gains
Many retail investors dipped their toes into investing only to end up with ludicrous gains. At this stage, these investors had most likely never even considered what to do about tithing on the gains, and this could easily lead them to forget about tithing altogether.
As an example, let’s relive the adventure of AMC’s stock growth during the Gamestop craze of early 2021.
Let’s assume the investor purchased 1,000 shares:
January 8th // AMC Stock Price is $2.14 // Unrealized Gains = $0 (0%)
We’re going to assume that the investor bought the stock on or before this date. At this point, the meme stock craze will take off over the coming days. Since the stock was just purchased, the unrealized gains are $0.
January 15th // AMC Stock Price is $2.33 // Unrealized Gains = $190 (8.88%)
It may not seem like much, but the 8.9% gains for a single week are a great return. $190 isn’t that significant, but that is partially due to the amount originally invested.
January 22nd // AMC Stock Price is $3.51 // Unrealized Gains = $1,370 (64%)
Many people hit this stage over the last two years, thinking “I just made a lot of money. Am I supposed to tithe on this?” At this point, many people determined that they didn’t know how to tithe in this situation, since their gains were fluctuating. In most cases, they didn’t even know who to ask for advice on tithing.
January 29th // AMC Stock Price is $13.26 // Unrealized Gains = $11,120 (519%)
Back in January 22nd, the investor was already seeing incredible growth. One week later, the growth became unreal. Unfortunately, many investors had already decided they didn’t understand how tithing on gains would work. They continued not to tithe.
June 18th // AMC Stock Price is $59.26 // Unrealized Gains = $57,120 (2,669%)
June 18th was the highest point that AMC’s stock reached. Most would not have sold perfectly on this day, but many experienced a ride that took them into 1,000% gains or more.
The example above is just one of many that have happened over the last two years. With crypto investments into Bitcoin, Etherium, Dogecoin or Shiba Inu, investors saw significantly greater gains than even the scenario described above.
As the investor holds the stock for weeks or months, they may begin to question what to do about the gains from the stock. The reality, however, is that the investor should only tithe on realized gains.
Realized gains are the gains on an asset after the sale of the asset. It’s important to focus on gains at this point since the gains are now set in stone rather than fluctuating like they were while the asset was still being held by the investor.
The problem with the above scenario is that the investor will tend to consider the tithe while the stock is still held. In the example, the gains were marked as “unrealized gains” because the AMC stock had not been sold, and the price was fluctuating every second.
Because these fluctuations don’t represent concrete earnings, we don’t tithe on unrealized gains (which is also why we aren’t taxed on unrealized gains).
When Do We Tithe on Capital Gains?
As explained above, investors aren’t obligated to tithe on unrealized gains. Fortunately, there are two times where tithing on these gains makes complete sense:
Method 1) Tithe on gains at the time that the stock is sold.
If the investor chooses to tithe when the stock is sold, then it’s up to them to calculate their gains based on the difference between the amount that they purchased the stock for and the amount that they sold it for.
This is already probably starting to sound a bit confusing. It’s easy for an investor to get stuck at this point, since they need to track this for every stock that they sell. If an investor started investing into more stocks because of the success from their AMC investment (which is very likely), tithing after selling quickly becomes overwhelming for most investors. Once again, they may decide tithing is not worth the trouble.
Method 2) Tithe at tax time.
Tax season forces every investor to pay taxes on their realized gains for the last year. Because these gains are explicitly stated when filing taxes, the amount of gains for all investments is presented in an easy-to-understand way so that any investor can tithe on the gains.
The solution is that simple. Tithe on your capital gains, which are clearly represented for you during tax season.
The Tax Season Giving Trend
The upward trend in March giving is great news because it indicates that there are plenty of retail investors who have figured out how to tithe on their gains.
Still, with tens of millions of new retail investors, there is a reasonable chance that you have retail investors in your church that never figured out how to properly tithe on their gains. This year, and in future years, March and April are great times to talk through how tax season is the perfect time to tithe on gains from investments.
With the right tools, you can also equip your investors to tithe with ease and convenience. Tithe.ly is an online platform that allows your church members to quickly and easily tithe from their mobile phones. Not only that, but Tithe.ly accepts donations of cryptocurrency–making it even simpler for retail investors to give in a way that makes sense for them. To learn more about Tithe.ly, click here.
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John is the Product Manager over our Finance teams at Tithe.ly. He has served as a missionary overseas, on staff at his local church, and spent over a decade building multiple mobile application platforms for churches. His other passions include running, reading, investing, and gaming.
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