How to Claim Charitable Tax Credits on Your U.S. Donations

  • United States-Canada Income Tax Treaty on Charitable Tax Credits

Canada is quite generous when it comes to rewarding those who donate. Whether you make provincial or federal political contributions, or donate to registered Canadian charities in the form of cash, securities or cultural property, you earn valuable Charitable Tax Credits that help offset your taxes owing.

So, are you extended the same reward if you donate to foreign charities?  With very few exceptions, the Canada Revenue Agency only recognises donations made to registered Canadian charities when it comes to claiming credits for Donations and Gifts.  One of these exceptions is U.S. charities.

Under the United States-Canada Income Tax Treaty, Canadians are allowed to claim charitable donations to American organisations on their tax return.   However, all contributions made must comply with existing Canadian tax laws and the restrictions established by them.

There are two scenarios under which you can claim donations to a U.S. charity or organisation on your tax return.  Your U.S. gifts came be claimed if:

  1. you earn U.S. income; or
  2. your donation is to a prescribed U.S. university.
United States-Canada Income Tax Treaty on Charitable Tax Credits

Under the United States-Canada Income Tax Treaty, Canadians are allowed to claim charitable donations to American organisations on their tax return.

Offsetting your U.S. donations is readily possible when you have a source of U.S. income.  For example, if you earn U.S. dividends, you can claim your U.S. donations up to 75{cae2521f64dcff784c511b644c6cc8c98f9594c79acdd41ba953a724385391e5} of the net U.S. income you report on your Canadian return.  This is fairly common as U.S. stocks form a portion of many investment portfolios.

If you travel throughout the year to the U.S. for employment or business, you are afforded the same tax privilege.  Under this approach, you can claim donations to registered U.S. charities up to 75{cae2521f64dcff784c511b644c6cc8c98f9594c79acdd41ba953a724385391e5} of your net world income, not just your U.S. net income.  However, eligibility hinges on these employment or business activities being your primary source of income.

Whether you earn income through U.S. investments or, income through employment, your chosen U.S. charities must be ones ordinarily allowed on a U.S. income tax return.  If a U.S. charity is not recognised by the Internal Revenue Service, your gift will not be eligible.

If you do not earn a form of U.S. income, you are still eligible to claim U.S. donations on your Canadian tax return.  Gifts to U.S universities are recognised under strict guidelines. The institution must either be:

  1. a prescribed university whose student body normally consists of Canadian students; or
  2. a college/university at which you or a family member is enrolled or of which you or a family member is an alumnus.

Since there is no requirement for U.S. income under this donation method, the eligible amount you can claim on your Canadian tax return is regulated by the CRA’s general charitable donation guidelines.

The rules governing cross-border Charitable Donation Tax Credit (CDTC) are rigorous.  If you would like more information on donations to U.S. organisations or other donation credits, like the First-time Donor’s Super Credit (FDSC) and the Political Contribution Tax Credit, that can help you, your family, or your business, contact GB Pilley & Associates Ltd., Chartered Professional Accountants at 604 926 3522.

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2017-01-04T15:01:47+00:00