Ma'aser kesafim on capital appreciation

Question

If you own property (e.g. stocks or real estate) that increase in value over the course of the year, are you require to donate 10% of the increase to tzedaka, if you are merely holding on to the assets rather than selling them? Or is the 10% not due until you sell the assets, as with US capital gains tax? Or none of the above?

Answer 1

See this website for an interesting attempt to define what types of income are deductible and not deductible for Ma'aser purposes.

http://www.pidyon.com/latest-writings/halacha/10-maaser/48-computing-maaser-how-much-tzedakah-charity-do-i-owe.html

While I see some deductions and non-deductions on his lists that I question, the overall effort is admirable, and it makes a great starting point for this discussion.

As a side note, a rabbi of mine once said that he believed (and Rav Dovid at the above website seems to agree with this, though I don't know the source for either of them) that you do not need to pay Ma'aser on money until it has been realized to you. In other words, taxes taken out of your paycheck before the money is received by you do not need to be considered as part of your income (ie, are deductible) for purposes of calculating Ma'aser. On the flip side of that (this is my own extrapolation, not the words of my rabbi), if you receive a tax refund, you would have to pay Ma'aser on the refunded money - if you did not previously take Ma'aser on the taxes that were removed from your paycheck.

Since capital gains and appreciation are not of any benefit to you until you liquidate the assets, I would think that you do not need to pay Ma'aser on them, especially if you are talking about the assessed value of real property. However, if you receive dividends or gains that you decide to immediately roll over into the purchase of new stock, etc., you might have to pay Ma'aser on those gains prior to the rollover. But definitely, DEFINITELY do not take my word on that, or any of what I said above in my own name. I'm not a Rav or Posek. Ask your own local Orthodox rabbi for further guidance and especially for Psak.

Answer 2

I don't have a source, but it makes sense to me that you only owe Ma'asar on property once you sell it.

Just because your house's Market Value goes up %10, that doesn't mean you'll get that price when you sell it. For example, what if you need to sell in a rush and are forced to take a lower price? What if the Market drops and you need to sell. Until you actually get the money in your hands, you haven't actually made the money. [For that matter, there are other methods of evaluating the house which may give you different results than the Market Value.]

I would say the same thing with regards to stocks. Your stock could go up $1000 dollars one day, and lose it all the next. Until you sell the stock, you haven't actually made the money.

Answer 3

R Avrohom Chaim Feuer brings an interesting view in his book The tzedakah treasury (p. 131) regarding investment portfolios.

He writes you need to give maaser once you sell the investment on the capital gain. However if you reinvest the gains in stocks right away, you do not need to pay (unlike the calculation from the IRS).

He sources the insights from R Tvi Spitz author of Minchas Tzvi, and R Moshe Heinemann.

As always CYLOR for your own case.

Answer 4

There are reasons the realization rule exists in American taxation. One issue to think about is, when would you pay the maaser? Would you calculate it on 29 Elul of each year?

Additionally, it might not be an issue for you, but liquidity could be problematic. For many, they would have to sell the security in order give the tzedakah.

Because of these issues and others, one would have to think that the realization rule should apply to tzedakah as well.

To be honest, this comes from my gut. As always, consult with your local Orthodox rabbi.