Imputation

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The crediting by God to believers with righteousness on account of Jesus Christ. Paul argues that Abraham did nothing which earned him the status of being righteous in the sight of God. Rather, Abraham believed the promise of God, and for that reason was granted the status of being righteous before God. Likewise, all who trust in Jesus Christ have righteousness imputed to them--that is, reckoned as if it was theirs. Imputation should not be confused with impartation. Believers are not made right ethically (impartation), but put right relationally (imputation). What God changes is not the character of believers but their legal standing before him. From this new position, believers are called to co-operate with the Holy Spirit in sanctification so that their character increasingly reflects their new standing.

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Righteousness imputed through faith not works

The example of Abraham

Romans 4:1–3 NASB95
What then shall we say that Abraham, our forefather according to the flesh, has found? For if Abraham was justified by works, he has something to boast about, but not before God. For what does the Scripture say? “Abraham believed God, and it was credited to him as righteousness.”
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The testimony of David

Romans 4:6–8 NASB95
just as David also speaks of the blessing on the man to whom God credits righteousness apart from works: Blessed are those whose lawless deeds have been forgiven, And whose sins have been covered. Blessed is the man whose sin the Lord will not take into account.”
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The principle holds true for everyone

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Believers’ sins are imputed to Jesus Christ

2 Corinthians 5:21 NASB95
He made Him who knew no sin to be sin on our behalf, so that we might become the righteousness of God in Him.

Imputed righteousness expresses itself in good works

James does not contradict, but complements Paul’s teaching by showing that the person who has been credited with righteousness will always express this in works.
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