Giving to U.S. Charities & the Canada-U.S. Tax Treaty... not a simple process
U.S. citizens/residents/greencard holders filing a U.S. Tax Return
Charitable contributions made are not always deductible in the year they are incurred. Unlike Canada, which issues a non-refundable tax credit based on the value of the donation, the U.S. has a systematic process for determining if donations are deductible and if any additional forms are required.
Now with a Liberal majority (congratulations), let’s look at their platform to try to figure out the possible tax implications.
But first… here is my take.
The Liberal Tax Plan is definitely an ‘income redistribution’ plan. Taking from the “1%” and giving to the “middle class”. Unfortunately, this plan is not targeting just the 1%; it is targeting those who aspire to be the 1%. The 1% test is actually meant to refer to wealth. There are also a number of measures that will catch others along the way.
The Canada Revenue Agency (“CRA”) offers a charitable donation tax credit as an incentive to donate in the form of tax savings for the charitable donors. This is a non-refundable tax credit which is applied to reduce taxes payable. Generally, you may claim eligible amounts of gifts up to a limit of 75% of your net income, with an exception for donations of certified cultural property or ecologically sensitive land.
The chart below listed donation credit rates for the current year:
New tax provisions were signed into law on July 31st, 2015, changing the filing deadlines for many U.S. tax returns and forms. Please keep the following changes in mind for tax years starting January 1, 2016.