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Tithing Considerations for Business Owners

© 2006 by Nick B. Nicholaou, all rights reserved
President, Ministry Business Services, Inc.
Submitted to Leadership Handbooks of Practical Theology

Calculating a tithe for employees is easy because they receive a paycheck.  Doing so for business owners is more difficult because there are so many organization models, income sources, and accounting system standards.  The result has been that business owners are left to themselves to identify their own methods for calculating a tithe.  I hope this attempt at identifying factors for business owners to consider is the beginning of a discussion that helps many to do what our Lord challenged us to in Malachi 3:10-12:

Bring the whole tithe into the storehouse, that there may be food in my house. Test me in this,” says the LORD Almighty, “and see if I will not throw open the floodgates of heaven and pour out so much blessing that you will not have room enough for it.  I will prevent pests from devouring your crops, and the vines in your fields will not cast their fruit,” says the LORD Almighty.  “Then all the nations will call you blessed, for yours will be a delightful land,” says the LORD Almighty.  (NIV)

Over-Arching Considerations

As business owners, we wrestled through these issues and found ourselves having to work through a number of challenges.

  • If the IRS limits how much a business can write off of its contributions (10% of net profit for corporations, 50% of adjusted gross income for unincorporated businesses), should that be our guideline?  While this definitely impacts us, we asked ourselves what we would do if we lived in a country that offered no tax incentives at all.  The answer we came to was that we would honor God with our tithe regardless of any tax considerations.  Working through that one issue framed how we approached everything else.
  • Should we tithe before or after taxes are paid?  It seems clear in the Scriptures that we are to tithe based on pre-tax amounts.  Leviticus 27:30-33a says:  ‘A tithe of everything from the land, whether grain from the soil or fruit from the trees, belongs to the LORD; it is holy to the LORD.  If a man redeems any of his tithe, he must add a fifth of the value to it.  The entire tithe of the herd and flock — every tenth animal that passes under the shepherd’s rod— will be holy to the LORD.  He must not pick out the good from the bad or make any substitution.'”  (NIV)

This was told to those in an agricultural economy, and there are adjustments we need to make as we apply the principal in today’s economy.  But what it does not say is to tithe what’s left from all that your fields produce each year after you’ve paid your taxes.

  • How obligated should we feel to tithe?  2 Corinthians 9:6-8 says:  Remember this: Whoever sows sparingly will also reap sparingly, and whoever sows generously will also reap generously.  Each man should give what he has decided in his heart to give, not reluctantly or under compulsion, for God loves a cheerful giver.  And God is able to make all grace abound to you, so that in all things at all times, having all that you need, you will abound in every good work.  (NIV)  Rather than seeing our tithe as a bill to pay, we approach it cheerfully as a privilege.  In fact, giving to our church is my favorite part of worship because it is my tangible offering to our loving and gracious Lord.

Calculating a Business’ Tithe

Many business owners want their business to be a “tithing business”.  The best “first fruits” model (calculating based on gross earnings) is to have the business tithe 10% of its book net income before taxes.  This calculation should include all forms of income.

Considerations:

  • Sole-Proprietorship.  Sole proprietors might think they should use their Schedule C net profit / loss (line #31) as their tithing basis.  However, the amount on this line can be reduced by some tax incentives in a way that it is no longer “first fruits”.
  • Partnership.  A majority of partners must agree on being a tithing business.  If they don’t, individual partners should base their business tithe on their K1’s total of lines 1-11 in Part III.
  • S-Corporation.  A majority of shareholders must agree on being a tithing business.  If they don’t, individual shareholders should base their business tithe on their K1’s total of lines 1-10 in Part III.
  • C-Corporations.  A majority of shareholders must agree on being a tithing business.
  • Accrual Basis Accounting.  Accrual basis accounting refers to when income and expenses are booked.  Since this method recognizes both income and expenses when they’re incurred, the tithe should still be based on the book net income.

Calculating a Business Owner’s Personal Tithe

A business owner should personally tithe 10% of his/her income from all sources before taxes.  This includes all types of income received from the business (paychecks, rents, interest, leases, etc) and other sources.  Excluded from this calculation are any investments that have changed value— up or down— but have not yet been realized.

Business owners are cautioned from approaching the tithe like a tax.  U.S. tax regulations allow many expenses that are really personal expenses to be paid by the business.  When considering the spirit and intent of God’s challenge to tithe, however, these expenses must be backed out to arrive at an appropriate “first fruits” amount.

The goal is not to live by a strict rule, but rather to live a life reflecting the generosity we received from our Lord.  He challenges us to tithe and live generously towards his works.  These guidelines will help in working through the issues, establishing a starting point, and living the generous lives we intend.

32 Comments

  1. Choya on May 12, 2019 at 8:37 am

    Hello, this is a great article. I have really been struggling with this. My wife and I have been liberal with our tithing and offering, but as we have moved forward with the business, we have had difficulty understanding what the Bible says about tithing Book net verses the book gross.

    When we were employed we always tithed the gross. Now that we have the business and are adding 1099 employees we are having trouble determining The best way to tithe according to Scripture.

    Do you have any Scriptural guidance that states that we should tithe from the book net verses book gross. It does not make logistical sense to me to tithe from the book gross especially with employees, however I am seeking the best scriptural guidance rather than my logistical opinion.

    Are there any examples of scriptural support and/or personal elaboration you can provide that suggest tithing from the book net vs book gross is best first fruit practice

    • Nick Nicholaou on June 28, 2019 at 10:40 am

      Hi Choya,

      Your question is a good one. The lack of specific scriptural guidance on the topic of business tithing, I think, is the reason most stay away from the topic of how to calculate a business tithe. But those of us with businesses want guidance! That’s why I wrote the article.

      We understand from scripture that a personal tithe is based on gross income. For those on a wage or salary, that’s easy to calculate. Businesses are different.

      I think it’s best to think through an exaggerated example to make the case for a business tithing based on what you’re calling ‘book net’.

      Think of a house builder. The business may sell the finished house for $1,000,000; should the business tithe on that amount (tithing $100,000)? Chances are the book net is less than $50,000. Tithing $100,000 would mean a net loss of $50,000! There is significant cost to the builder: land, materials, labor, selling fees, and more. Even if the owners of the business include their salaries (for which they should personally tithe based on their personal gross) in calculating the net book income, the business still could not sustain such a tithe calculation, and would soon close its doors. The same would be true for manufacturers of durable goods (cars, planes, microwave ovens, refrigerators, etc).

      Knowing that the Lord wants us to be good stewards, or managers, it doesn’t make sense that he, a loving God, would require so much.

      Thus, I think there’s good logical reasoning for a business to calculate its tithe based on book net vs gross.

      I hope that helps!

      Nick

  2. Choya on June 19, 2019 at 6:32 pm

    This is a great conversation, certainly helpful. I appreciate your perspective, your contribution to education on this matter, and your reply

    • Nick Nicholaou on June 27, 2019 at 3:26 pm

      Thank you, Choya!I’m still thinking through a response to your question in my mind and hope to post it soon.

  3. Magdaline on July 8, 2019 at 8:12 am

    Hello, thanks for the guidance you are giving on these matters. Was struggling with the issue of tithe as I want to honour the Lord with the business.

    Mine is a sole proprietorship. The method of charging is that I charge the client the money that I actually spend for things like printing charge, postage, cost of communication, transport etc. Do I give tithe on these disbursements. Does the answer change if the client pays me a disbursement that I will have to pay, say, a government office for the service e.g. filing cost?

    Secondly, I charge fees for services provided and value added tax (V.A.T) on the fees. Do I give tithe on both the fees and V.A.T or the fees only?

    As pertains costs like rent and labour, these are paid for by myself from the fees/income. Do I give tithe prior to paying these bills or after paying bills?

    • Nick Nicholaou on July 31, 2019 at 9:00 am

      Hi Magdaline,

      Tithing for business is on net profits, so you would not tithe on costs, but only on your total fees as they exceed your total costs.

      Blessings!

      Nick

  4. Joe L on July 11, 2019 at 9:09 am

    I freelance on the side and most of my customers pay me via Paypal. Should I tithe on the amount that I collect from the client before or after Paypal’s fees?

    • Nick Nicholaou on July 31, 2019 at 9:02 am

      Hi Joe!

      Paypal’s fees are part of your cost of doing business, so they would not be included in your tithe calculation.

      Blessings!

      Nick

      • FRANK on November 8, 2019 at 10:52 am

        IF THE COST OF BUYING A LAND AND BUILDING A HOUSE IS $1,000,000 AND THE PROPERTY WAS SOLD FOR $1,500,000 HOW MUCH IS THE TITHE?.

        • Nick Nicholaou on November 8, 2019 at 12:03 pm

          If the business’ total business-related expenses was $1,000,000, and the sale was $1,500,000, that would mean a net profit of $500,000. The business would tithe based on that net profit. The percentage of the tithe is determined by the business; Scripture states 10%, but that can be considered a minimum. If the tithe is 10%, that would be $50,000.

  5. Michael on July 15, 2019 at 4:39 am

    Our company began business in 2014 with some investments but we have not broken even as at 2018 calendar year. We have been making sales, paying salaries and other operational costs but have not yet recovered the initial investments made. Now do we tithe based on our profit (income-expenses) per calendar year or do we wait till the business breaks even before we begin to tithe?

    • Nick Nicholaou on July 31, 2019 at 9:05 am

      Hi Michael!

      The investment liabilities are not part of the tithe calculation. Payments to them would be, however, like principal or interest. So the tithe is based solely on your revenue less non-personal expenses.

      Blessings!

      Nick

  6. Chuck on July 22, 2019 at 5:43 pm

    You do a job for 9000. And your material is 4000 labor is 2500 . Do pay tithe on the 9000 or .or the 2500 left to your income

    • Nick Nicholaou on July 31, 2019 at 9:12 am

      Hi Chuck!

      Your business tithe would be based on the net income, or $2500. If the labor was income to you personally, you would personally tithe on the $2500 you were paid for doing the job.

      Using a different example to make the math less confusing, if the business charged $10,000 for a project that had material costs of $4,000 and labor costs of $2,500, resulting in a net profit (assuming no other business expenses) of $3500, the business would tithe on $3500. If the labor cost was personal income to you, you would personally tithe based on the $2,500 of personal income.
      They are treated as separate entities.

      Hoping that helps,

      Nick

  7. Franklin Ryan on July 25, 2019 at 2:09 am

    After praying for an answer, you actually answered the same way I was thinking is the only way it should be done (being a good steward & tithing on the net).

    GOD can’t be your business partner if he’s not receiving his portion of the ‘profit’.

    • Nick Nicholaou on July 31, 2019 at 9:12 am

      Well said, Franklin!

  8. Vivian on July 26, 2019 at 3:18 pm

    Hello
    As a business owner, I pay myself salary to avoid dipping into the business funds anytime. So when should I tithe on. My salary, paid by the business or business profits

  9. John on July 31, 2019 at 6:12 am

    Hello,
    So this is something that I’ve been seeking out the last few years and can’t find a solution to. We farm/ranch and run basically a business model. The problem is we aren’t making money. We are having a net loss. The current Ag economy coupled with the weather has made things very difficult. Recently I sold a pen of cattle that had a gross income of 31k. But the net loss was 24k on that pen. That’s just one pen. Multiple pens have led to a lot more losses. I was just wondering if I’m suppose to tithe out of the 31k gross even though there wasn’t any profit?

    • Nick Nicholaou on July 31, 2019 at 9:20 am

      Hi John,

      Business tithes are based on net profit (assuming no inappropriate expenses have been added to the calculation to reduce the net profit – you can’t fool God!). A business with a loss in a period (month, quarter, year, etc) would not have a net profit to tithe on. I should probably mention that the calculation is not based on a single transaction, but on business activity in a period of time (again: month, quarter, year, etc).

      Hoping that helps and that your business turns around,

      Nick

  10. Magdaline on July 31, 2019 at 11:12 pm

    I appreciate your feedback, Nick. Very helpful.

    God do you good.

    • Nick Nicholaou on August 1, 2019 at 8:06 am

      Glad to help!

      Blessings!

      Nick

  11. Eve on August 2, 2019 at 2:48 am

    Good day. Please I run the family’s business and I travel to get goods sometimes worth 600 dollars. I end up tithing based on all that I make. Please do I need to subtract the 600 dollars from the money made from the sales and then tithe based on what is left? e.g if I get goods worth 600 dollars and get 800 dollars. Can I tithe based on 200 dollars? Thank You

  12. L'rece Morgillo on August 27, 2019 at 7:28 pm

    Hi Nick. Great conversation. Thank you for being available to write and respond about it to so many that are curious and serious about being better stewards (in both generosity and tithing). You may have already answered this, so feel free to flip a link to the answer.
    What about Tax return income? I pay my tithe from the gross (as a casual employee of a large business as well as a casual government employee). So if I get 5k in my tax return, do I then pay 10%? I feel I need to as all income is from Him. But… I ask myself, do I?, as I’ve paid my tithe already from my gross income. It’s a question I’ve asked a couple of people who have generally said, ‘good question!’ But not actually able to answer it.
    I also have a hobby business. I pay wholesale, sell retail. I tithe from the profits after my market stall rent. When I pay wholesale and forward onto members in my team, I don’t need to tithe. That is all correct?
    I’m far from business minded or involved with keeping books. I have however started keeping an expense journal of incoming and outgoings of everything as I am seeking to be a better steward and want my ducks in a row so I’m honouring my Father in Heaven.
    Thanks for your time.
    L’rece

    • Nick Nicholaou on September 2, 2019 at 11:32 am

      Hi L’rece!

      Thank you for your encouragement!

      Tax refunds are not taxable if the tithe was calculated before taxes. If the tithe was calculated after taxes, then the refund would be taxable.

      Regarding the hobby business question, I wasn’t quite sure the issues being asked about “…forward onto members in my team”).

      Hoping that helps,

      Nick

  13. Tricia on August 29, 2019 at 4:48 am

    Hi,
    I have a sole proprietor cash basis business. Each month it is netting about $2000 dollars. Each month I draw $1000 out of the business as my income. Do I tithe on the $1000 or the $2000?
    Thank you!

    • Nick Nicholaou on September 2, 2019 at 11:34 am

      Hi Tricia!

      In the situation you describe, the business would tithe on the remaining $1000 net profit. Also, you would personally tithe on the $1000 income draw. Separate checks from separate entities.

      I hope that helps!

      Nick

  14. Joan on November 10, 2019 at 6:57 am

    Hi Nick, thank you for all the advise.
    I run a business, and do I tithe on the net income or Actual cash received. Business just started to turn around with God’s blessing but cash flow is still almost negative, stuck in receivables.

    • Nick Nicholaou on November 11, 2019 at 8:06 am

      You’re welcome, Joan!

  15. Patrick Bacon on December 1, 2019 at 3:55 am

    Thank you so much for providing guidance. God bless!!

    • Nick Nicholaou on December 1, 2019 at 1:25 pm

      You’re welcome, Patrick!

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