How to Separate Maaser from One’s Income: Gross vs. Net[1]
- Understanding Gross vs. Net Income:
Before addressing the halachic ruling, it is important to clarify the financial terms commonly used. Gross income refers to the total amount of money earned before any deductions. Net income refers to the amount remaining after all allowable expenses, taxes, and costs have been deducted. These are standard financial terms used in accounting and taxation, and they form the basis for determining how maaser is calculated.
- Example: Gross vs. Net Calculation For example, if one earns $10,000 in gross income: If maaser were taken from the gross, the obligation would be $1,000. If expenses reduce the income to $6,000 net, then maaser taken from the net would be $600.
- The Halachic Ruling – Net Income[2]
According to all opinions, maaser is to be separated from the net amount, not from the gross amount. This means that maaser is given only on actual profit earned, not on total revenue received. Accordingly, all legitimate business expenses incurred in generating that income are deducted, as they are not considered profit at all.
- Example: If a person spent $100 of Maasered money purchasing merchandise and then sold it for $200, according to all opinions he separates maaser only from the $100 profit, and not from the full $200 revenue.
Nonetheless, what remains subject to discussion is the precise definition of what constitutes a legitimate business expense or an expense that may be deducted from gross income. This issue—what qualifies as deductible and what does not—will be elaborated upon in the following paragraphs.
- Deducting Business Expenses
What Counts as Deductible Business Expenses:[3] All expenses incurred for the purpose of generating income may be deducted from revenue in order to arrive at net income. This includes:
- Travel expenses[4]
- Cost of the product being sold
- Cost of furniture and other office needs
- Food and drink supply for the business
- Employee wages
- Office rent
- Utilities
- Insurance of the business and equipment[5]
- Advertising costs
- Shipping
- Uniforms or other clothing needed for the business
- Security guards and other security related expenses
- Any other expenses directly related to operating the business
Time invested in earning the income:[6] One may not deduct the value of his own time invested in earning the income. For example, if a person worked 120 hours in a month, he may not claim that the value of those hours should be deducted from his income. Although there are some Poskim[7] who are lenient in this regard, the primary ruling is to be stringent.
Losses and Damages:[8] Losses and damages may be deducted. For example, if merchandise purchased for resale was destroyed or stolen, the loss may be deducted from income.
Luxury Business Expenses:[9] Luxury business expenses which are not necessary for the business may not be deducted. This includes items such as:
- An excessively expensive vehicle
- Luxury watches (e.g., a Rolex)
- Extravagant business meals
Mixed-Use and Personal Items:[10] Expenses that one would incur regardless of the business, such as a personal vehicle that is also used for business, may not be deducted. However, some Poskim[11] are lenient.
Taxes:[12] Business-related taxes may be deducted from revenue, including:
- Federal and state taxes
- VAT
- Property taxes associated with the business
Indirect Necessary Expenses:[13] Indirect expenses that are necessary for earning income may also be deducted, such as:
- Childcare
- A housemaid, where needed in order to work
Training and Education:[14] Training, education, or college expenses that were necessary in order to qualify for and perform the job are considered business expenses and may be deducted.
- Deducting Personal Expenses[15]
The Dispute: Some Poskim[16] rule that even personal living expenses—such as food, housing, and clothing—may be deducted before calculating maaser. However, most Poskim[17] maintain that only expenses directly related to earning income may be deducted, and not personal expenses.
- Example: Reuven earns $8,000 in a given month. After deducting $2,000 in valid business expenses, he is left with $6,000. If Reuven follows the opinion that allows deducting personal expenses, he would first subtract his living costs—for example, $3,500 for rent, food, and clothing—leaving him with $2,500. He would then give maaser on that amount, totaling $250. By contrast, if Shimon has the same income and business expenses but follows the opinion that only business expenses may be deducted, he would calculate maaser based on the $6,000 remaining after business deductions. Accordingly, he would give $600 in maaser, without subtracting any personal living expenses.
Practical Ruling:[18] Practically, the ruling is that one should not deduct personal expenses. However, if a person cannot afford to give maaser otherwise, it is preferable that he deduct personal expenses and give maaser according to the lenient opinions, rather than not give maaser at all.
Personal Taxes: With regard to personal taxes—such as health insurance, Social Security, and property taxes on one’s home—some Poskim[19] rule that they may not be deducted, while other Poskim[20] permit it.
Tables
- Understanding Gross vs. Net Income
| Topic | Explanation |
| Gross Income | The total amount of money earned before any deductions. |
| Net Income | The amount remaining after all allowable expenses, taxes, and costs have been deducted. |
Example: Gross vs. Net Calculation
| Scenario | Amount |
| Gross Income | $10,000 |
| Maaser from Gross (10%) | $1,000 |
| Net Income (after expenses) | $6,000 |
| Maaser from Net (10%) | $600 |
- The Halachic Ruling – Net Income
| Topic | Explanation |
| Core Ruling | According to all opinions, maaser is separated from net income, not gross income. |
| Definition | Maaser is given only on actual profit, not total revenue. |
| Business Expenses | All legitimate expenses incurred to generate income are deducted, as they are not considered profit. |
| Ongoing Discussion | There is debate regarding what qualifies as a deductible expense. |
Example
| Scenario | Amount |
| Cost of Merchandise | $100 |
| Sale Price | $200 |
| Profit | $100 |
| Maaser Obligation | Only on $100 (profit), not $200 (revenue) |
- Deductible Business Expenses
| Category | Examples |
| Travel | Transportation for business |
| Inventory | Cost of products sold |
| Office Needs | Furniture and supplies |
| Food/Drink | Business-related supplies |
| Employees | Wages and salaries |
| Rent | Office rent |
| Utilities | Electricity, water, etc. |
| Insurance | Business and equipment insurance |
| Advertising | Marketing and ads |
| Shipping | Delivery costs |
| Clothing | Uniforms or required attire |
| Security | Guards and security expenses |
| General | Any expense directly tied to operating the business |
- Special Cases in Business Expenses
| Topic | Ruling |
| Time Invested | One may not deduct the value of his own labor/time. Some are lenient, but the main ruling is stringent. |
| Losses & Damages | Deductible (e.g., stolen or destroyed goods). |
- Non-Deductible or Limited Expenses
| Category | Ruling |
| Luxury Expenses | Not deductible (e.g., luxury car, Rolex, extravagant meals). |
| Mixed-Use Items | Generally not deductible if used for personal needs (e.g., personal car), though some are lenient. |
- Taxes and Indirect Expenses
| Category | Deductibility |
| Business Taxes | Deductible (federal, state, VAT, business property tax) |
| Indirect Expenses | Deductible if necessary for work (e.g., childcare, housemaid) |
| Training/Education | Deductible if required for the job |
- Deducting Personal Expenses
- The Dispute
| Opinion | Ruling |
| Some Poskim | Allow deduction of personal expenses (food, housing, clothing) |
| Most Poskim | Do not allow personal expense deductions; only business expenses are permitted |
- Practical Example
| Scenario | Reuven (Deducts Personal) | Shimon (Business Only) |
| Gross Income | $8,000 | $8,000 |
| Business Expenses | $2,000 | $2,000 |
| Net After Business | $6,000 | $6,000 |
| Personal Expenses | $3,500 deducted | Not deducted |
| Final Amount for Maaser | $2,500 | $6,000 |
| Maaser Given | $250 | $600 |
- Practical Ruling
| Situation | Ruling |
| Standard Practice | Personal expenses should not be deducted |
| Financial Difficulty | One may rely on lenient opinions rather than not giving maaser at all |
- Personal Taxes
| Type of Tax | Ruling |
| Health Insurance | Disputed |
| Social Security | Disputed |
| Home Property Tax | Disputed |
| Overall | Many Poskim do not allow deduction; some permit it |
[1] See Sefer Halachos Maaser Kesafim chapters 13; 21-25 for the full details of this matter; Pesakim Uteashuvos 249:27-29; Tzedaka Umishpat [Bloy] 5
[2] Michaber Y.D. 249:1 “The first year from the Keren. From that year and onwards Chomesh from the annual profit.”; Yerushalmi Peiah 1; Tosafus Kesubos 67b; Rosh Kesubos 4:15
[3] Nishal David 23; Chavos Yair 224; Sheilas Yaavetz 6; Beis Lechem Yehuda; Beis Din Shel Shlomo 1; Minchas Yitzchak 5:34; Shevet Halevi 5:133-5; Tzedaka Umishpat 5:8; Pesakim Uteshuvos ibid footnote 249
Other opinions: Some poskim question whether one may deduct all expenses that were incurred in order to generate income from the net profit. According to this view, not every expense necessarily qualifies as deductible. For example, it has been suggested that certain expenses—such as travel expenses—may not always be deducted when calculating net income for maaser purposes. [See Sheilas Yaavetz 1:6; Pischeiy Teshuvah 249:1; Shvus Yaakov 2:84; Haflah Kesubos 50a]
[4] Chavos Yair 224
Other opinions: Some Poskim rule that travel expenses may not be deducted when calculating net income for maaser purposes. [Sheilas Yaavetz 1:6; Pischeiy Teshuvah 249:1]
[5] Tzedaka Umishpat 5:8 footnote 37
[6] Minchas Yitzchak 5:34-5
[7] Sheilas Yaavetz 1:6; Nishal David Y.D. 20
[8] Chavos Yair 224; See Shevus Yaakov 2:86; Pesakim Uteshuvos ibid footnote 254
[9] Chavos Yair 224 writes cannot deduct a suit with silver buttons and only regular clothing may be deducted; Minchas Yitzchak 5:34 – 6
[10] Beis Din Shel Shlomo 1; Teshuvos Vehanhagos 1:560 – 10
Other opinions: Some poskim rule that even such expenses may be deducted when calculating net income for maaser purposes. [Chavos Yair 224]
[11] Chavos Yair 224
[12] Birkeiy Yosef 249 in name of Or Hachaim; Igros Moshe Y.D. 1:143; Minchas Yitzchak 5:34 – 9; Shevet Halevi 5:133-4; Tzedaka Umishpat 5:36
[13] Tzedaka Umishpat 5:35; Chut Shani Shabbos 2:331
[14] Pesakim Uteshuvos ibid footnote 262
[15] See Pesakim Uteshuvos 249:29; Shevet Halevi 5:133 – 4
[16] Avkas Rochel 3 “One should not separate maaser from the total profit, but only from the amount that remains after covering necessary personal expenses such as food, drink, clothing, and all other basic living needs required for his support. Maaser is then separated from whatever remains beyond these essential expenses.”; Kneses Hagedola 249:1; Kitzur SHU”A 34:4; Tzitz Eliezer 10:6; Kinyan Torah 1:102
[17] Birkeiy Yosef 240:5 [points out a contradiction in this Teshuvah of Avkas Rochel]; Nishal David 23; Chavos Yair 224; Sheilas Yaavetz 6; Pischeiy Teshuvah 249:1; Shvus Yaakov 2:84; Haflah Kesubos 50a; Beis Din Shel Shlomo 1; Avnei Tzedek 141; Aruch Hashulchan 249:7
[18] Shevet Halevi 5:133
[19] Igros Moshe Y.D. 1:143; Tzedaka Umishpat 5:36
[20] Minchas Yitzchak 5:34 – 9; Shevet Halevi 5:133-4