U.S. Donations Made by a Canadian

By Kevin Lau, Senior Manager, Tax Services

With Canada and the U.S. sharing such a close relationship in many aspects of our daily lives, undoubtedly many Canadians would have personal and professional ties to our American neighbour. This includes those of us who are philanthropically oriented and who may have charitable organizations that they wish to support especially in the U.S. From a tax perspective, many of us are familiar with the idea of receiving a donation tax credit for charitable gifts made to Canadian charitable organizations, but what happens when Canadians make charitable gifts to organizations outside of Canada such as in the U.S.?

Gifts made to certain organizations outside of Canada, which are considered “qualified donees” from the CRA’s perspective, can be claimed on your tax return similar to a Canadian charitable gift. These are:

• Universities outside Canada, the student body of which ordinarily includes students from Canada, that are registered with the CRA;
• Registered foreign charities to which Her Majesty in Right of Canada has made a gift
• United Nations and its agencies

You may refer to the CRA’s List of Charities to verify whether the organization you wish to donate to is a “qualified donee”.

Gifts made to U.S. charities outside of the above categories can be claimed on a Canadian tax return but the tax benefits are limited. In such a case, these donations can only be claimed against U.S.- sourced income such as U.S. dividends earned in a non-registered Raymond James account. This is provided that the U.S. organization is generally exempt from U.S. tax and it could qualify in Canada as a registered charity if it were a resident of Canada.

One exception to the U.S. income limitation is for taxpayers who live near the border. You may be able to claim the eligible amount of your gifts to U.S. organizations up to 75% of your net world-wide income if you meet all the following conditions:

• You live near the border in Canada throughout the year
• You commute to your principal workplace or business in the U.S.
• This employment or business was your main source of income for the year

When in doubt, it is best to confirm with a tax professional regarding the eligibility of claiming a donation tax credit on your tax return.

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