Cross Border Charity Archives - Charity Exchange https://charity.exchange/tag/cross-border-charity/ Thu, 10 Feb 2022 22:04:09 +0000 en-US hourly 1 Have you done a search online for cross border charity? https://charity.exchange/blog/have-you-done-a-search-online-for-cross-border-charity/ Thu, 10 Feb 2022 22:04:09 +0000 https://charity.exchange/?p=1266 Have you done a search online for cross border charity? Are you a Canadian or American donor looking to donate to a charity across the border?  You may have searched online for a way to make a tax-deductible donation to a charity abroad. Finding a charity that can help you make a tax-deductible donation to … Continue reading "Have you done a search online for cross border charity?"

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]]> Have you done a search online for cross border charity?

Are you a Canadian or American donor looking to donate to a charity across the border?  You may have searched online for a way to make a tax-deductible donation to a charity abroad. Finding a charity that can help you make a tax-deductible donation to a worthy charity in another country can be a challenge. There are few charities that support charitable work abroad but usually it is an affiliate charity operating in the other country or a specific charity they support.

Charity Exchange can help donors make tax-deductible donation in Canada, Israel and USA to any registered charity in Canada, Israel and the USA.

Searching online will produce the following result with very basic cross border charity information but no viable solution. Here are some results we found when doing a google search

What You Need to Know About Cross-Border Giving

Ensure that there are no sanctions against the country where the gift or grant will be made.

Cross-Border Philanthropy – A US Perspective

U.S. tax law imposes remarkably low barriers to cross–border philanthropy. Contributions to U.S. charities are deductible even if all charitable.

Can I claim donations made outside of Canada?

Community foundations can accept gifts from foreign donors and issue Canadian tax receipts. Charitable tax receipts issued in Canada can only be used to offset Canadian income. So, the tax receipt can only be applied if the donor has Canadian income from employment or other sources

Are donations made to other countries tax deductible?

The IRS reminds donors that contributions to foreign organizations generally are not deductible. Taxpayers must itemize their deductions on Schedule A for the year in which they made the contribution in order to take a charitable contribution deduction.

How to get a tax deduction for donations to US charities

Article content. Our tax system offers generous benefits to donors who choose to make gifts to registered charities. Individuals can claim both

Are donations to U.S. charities tax deductible in Canada

Canada also accepts donations made to eligible U.S. charities for a donation tax credit on the Canadian tax return. … First, the contribution is still subject to the 75% of net income threshold applied to Canadian donations. Secondly, the contribution to a U.S. charity must offset U.S. source income

How to get a tax deduction for donations to US charities

The tax treaty between Canada and the U.S. provides some limited tax relief for gifts made by Canadians to U.S. charitable organizations, but the rules are slightly complicated

Legal Notice: Opinions in this blog post do not reflect the opinion or endorsement of Charity Exchange or its affiliates. The opinions in this post should not be used as legal or financial advice for any financial decision. The advice or opinions shared in this blog post are solely those of the author and are not the opinion of Charity Exchange or its affiliates. For legal or financial advice, always consult with your financial advisor or legal council.

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]]> How to get a tax deduction for donations to U.S. charities https://charity.exchange/blog/how-to-get-a-tax-deduction-for-donations-to-u-s-charities/ Tue, 12 Oct 2021 14:03:53 +0000 https://charity.exchange/?p=1234 An interesting article by Janmie Golombek of CIBC Wealth Advisory Services in Toronto Published in the Financial Post explores how Canadians can get a tax deduction for a donation to a US charity. In a nutshell, if your tax return includes some U.S. source income, such as U.S. dividends for example, you can claim your … Continue reading "How to get a tax deduction for donations to U.S. charities"

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]]> An interesting article by Janmie Golombek of CIBC Wealth Advisory Services in Toronto Published in the Financial Post explores how Canadians can get a tax deduction for a donation to a US charity.

In a nutshell, if your tax return includes some U.S. source income, such as U.S. dividends for example, you can claim your gifts to U.S. charities up to 75 per cent of the net U.S. income you reported on your Canadian return. In a couple of cases, however, you may be able to claim your U.S. gifts up to 75 per cent of your worldwide net income. The first situation is if you live in Canada, but near the U.S. border, throughout the year and commute to your principal workplace or business in the U.S., provided that U.S. employment or business was your main source of income for the year. Secondly, your U.S. donation claim won’t be limited to only your net U.S. income if your gift was made to a U.S. college or university at which you or a family member either is or was enrolled, or if your gift is to a prescribed U.S. university “the student body of which ordinarily includes students from Canada.”

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The tax treaty between Canada and the U.S. provides some limited tax relief for gifts made by Canadians to U.S. charitable organizations, but the rules are slightly complicated.

Our tax system offers generous benefits to donors who choose to make gifts to registered charities. Individuals can claim both federal and provincial tax credits worth up to 50 per cent of the amount donated, depending on your province of residence. Corporations can claim a deduction from their taxable income for qualifying donations. In both cases, the amount that can be claimed is limited to 75 per cent of net income for the year.

So, what exactly constitutes a valid donation?

How to get a tax deduction for donations to U.S. charities

Well for starters, the gift must be made to a registered charity, which is defined as a charitable organization, public or private foundation that is resident in Canada and that has obtained official Canada Revenue Agency registered status. As of this week, there are 85,881 registered charities in Canada.

You can find out whether the charity you wish to benefit is registered by visiting the CRA’s website (cra-arc.gc.ca) and on the “Charities and giving” page, going to the “Charities Search” box.

But what if you make a donation to a U.S. charity?

You’re in luck, since the tax treaty between Canada and the U.S. does provide some limited tax relief for gifts made by Canadian residents and corporations to U.S. charitable organizations, but the rules are slightly complicated.

In a nutshell, if your tax return includes some U.S. source income, such as U.S. dividends for example, you can claim your gifts to U.S. charities up to 75 per cent of the net U.S. income you reported on your Canadian return. In a couple of cases, however, you may be able to claim your U.S. gifts up to 75 per cent of your worldwide net income. The first situation is if you live in Canada, but near the U.S. border, throughout the year and commute to your principal workplace or business in the U.S., provided that U.S. employment or business was your main source of income for the year. Secondly, your U.S. donation claim won’t be limited to only your net U.S. income if your gift was made to a U.S. college or university at which you or a family member either is or was enrolled, or if your gift is to a prescribed U.S. university “the student body of which ordinarily includes students from Canada.”

A recent decision from the Court of Quebec, however, spells trouble for Quebec donors looking to donate money to U.S. charities. The court ruled that a Quebec manufacturing company was precluded from claiming nearly $500,000 worth of U.S. donations on its Quebec return against its U.S. source income, finding that the section of the Canada-U.S. tax treaty that would otherwise allow the claim doesn’t apply to Quebec since Quebec is not a party to the Treaty.

Troy McEachren, a tax partner with Miller Thomson LLP in Montreal, called the court’s interpretation “problematic” in a case comment issued this week. He argues that the interpretation is “overly technical and ignores the purpose of the provision, which is to permit the application to Quebec’s fiscal legislation of the effects of tax treaties entered into by Canada.”

Fortunately for Quebec donors, the company has appealed the decision to the Court of Appeal of Quebec. So, stay tuned, but in the meantime, Quebec donors may wish to tread cautiously.

 Click here to read the full article

Legal Notice: Opinions in this blog post do not reflect the opinion or endorsement of Charity Exchange or its affiliates. The opinions in this post should not be used as legal or financial advice for any financial decision. The advice or opinions shared in this blog post are solely those of the author and are not the opinion of Charity Exchange or its affiliates. For legal or financial advice, always consult with your financial advisor or legal council.

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]]> Alumni living in the US donating to charities in Canada. https://charity.exchange/blog/alumni-living-in-the-us-donating-to-charities-in-canada/ Wed, 02 Jun 2021 14:09:26 +0000 https://charity.exchange/?p=1145 The top 10 universities in Canada are University of Toronto, The University of British, Simon Fraser University, McGill University, University of Waterloo, York University, University of Alberta, Queen’s University, University of Calgary, McMaster University. There are US residents who are expats or are alumni of Universities or Colleges in Canada. At times the university, college or community organization hold … Continue reading "Alumni living in the US donating to charities in Canada."

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]]> The top 10 universities in Canada are University of Toronto, The University of British, Simon Fraser University, McGill University, University of Waterloo, York University, University of Alberta, Queen’s University, University of Calgary, McMaster University.

There are US residents who are expats or are alumni of Universities or Colleges in Canada. At times the university, college or community organization hold fundraisers and the expat or alumni seek to donate and or support their cause. Often the question of receiving a US tax-deductible receipt for the donation to the charity in Canada is discussed and explored.

For example, alumnus of the University of Toronto, McGill University of Montreal or University of BC who are living in the US and want to support their former school with a donation of $5,000. When sending the donation directly to the Canadian institution, the university may issue a Canadian tax-deductible receipt. However, the former student are currently residing and working in the US and the Canadian tax-deductible receipt offers no tax benefit or deduction on their tax return.

Charity Exchange offers a solution that can help alumnus of educational institutions in Canada make a US tax-deductible donation to the Canadian institution through their donation matching program. The donor signs up for a charity exchange donor advised fund account and makes a matching donation using the global matching donation platform. The donations is matched with donors in Canada and the Canadian charity or institution receives their donation from the Canadian Donor Advised Foundation.

To learn more about the donation matching program click here

 

 

Legal Notice: Opinions in this blog post do not reflect the opinion or endorsement of Charity Exchange or its affiliates. The opinions in this post should not be used as legal or financial advice for any financial decision. The advice or opinions shared in this blog post are solely those of the author and are not the opinion of Charity Exchange or its affiliates. For legal or financial advice, always consult with your financial advisor or legal council.

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]]> Tax-Deductible Donations to Yeshiva or Seminary in Israel, Canada or USA https://charity.exchange/blog/tax-deductible-donations-to-yeshiva-or-seminary-in-israel-canada-or-usa/ Mon, 26 Apr 2021 17:44:05 +0000 https://charity.exchange/?p=896 Are you looking to make a tax-deductible donation to a charity abroad? Would you like to send charitable funds to a Yeshiva, seminary, Shul, Chessed organization, school, camp, or any other charitable organization outside your home country? Do you run a charity and have Donors in other countries who would like to make a tax-deductible … Continue reading "Tax-Deductible Donations to Yeshiva or Seminary in Israel, Canada or USA"

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]]> Are you looking to make a tax-deductible donation to a charity abroad?

Would you like to send charitable funds to a Yeshiva, seminary, Shul, Chessed organization, school, camp, or any other charitable organization outside your home country? Do you run a charity and have Donors in other countries who would like to make a tax-deductible donation to your charity?

Charity Exchange Can help! Charity Exchange’s new and revolutionary method of cross border donations can help donors and charities make tax-deductible donations to charities abroad.

Charity Exchange’s charitable foundation and Donor Advised Fund operates in the USA, Canada and Israel. The Foundation offers a Global Donation Matching program. The Global Donation Matching program is a great tool for donors to use when seeking to support charities outside their home country. The benefit of donating to the foundation and using the donation matching program, is that all donations are tax-deductible. Donors receive a tax-deductible receipt for funds deposited to their Donor Advised Fund Account.

How does the matching donation program work?

The concept of the global matching donation program is to pair two (or more) donors from different countries and match their donations. Each donor’s donation supports the other donor’s charity.

Here is an example of how it works.

Justin, from Montreal Canada, wants to make a $1,300 CAD donation to the American Red Cross. Justin sets up an account and creates a $1,300 donation to be matched and sent to the American Red Cross. The donation is pending on the charity exchange platform until a matching donation is found in the USA.

How is a matching donation found?

Joe, from Washington DC in the USA, wants to make a $1,000 USD donation to Feed the Poor Canada organization. Joe creates a $1,000 donation to be matched and sent to Feed the Poor Canada. The donation is instantly matched with Justin’s pending donation to the American Red Cross.

The result, Justin from Canada’s $1,300 CAD donation is sent to Feed the Poor Canada to support Joe’s, from Washington, selected charity. And Joe from Washington $1,000 USD donation is sent to the American Red Cross to support Justin’s, from Canada, selected charity. Essentially the donors exchange donations by making a recommendation (to the Donor Advised fund) to donate their funds to the charity the other donor selected.

To use the service, the donor would need to open a Charity Exchange account and deposit a donation to their Donor Advised Fund account. Once the funds are donated and cleared in the Donor’s account the donor can recommend a donation to any registered charity in the countries Charity Exchange operates in using the matching donation program. Charity Exchange operates in Canada, Israel, and the USA.

Is personal information kept private?

Yes, the donor’s personal information is strictly private and confidential. When a donation match is made and paired with another donor’s donation the donors do not see who they are matched with. Only the receiving charity can see the donor who selected their charity for their donation but not the other donor. Charity Exchange has a strict privacy policy and does not share personal information with any other party.

Are there other unique features offered by Charity Exchange?

Yes. We accept Bitcoin and other Crypto currency donations

Crypto currency donations are an emerging trend for charitable giving. More and more donors are looking to donate crypto to their favourite charities. However, many charities do not have the know how or the tools to accept crypto donations.

Charity Exchange provides a platform for donors and charities to donate and accept crypto currency. Donors deposit their crypto currency into their Donor Advised Fund account and receive a tax-deductible receipt for the fair market value of their crypto currency. Donors then gift the donation to any registered charity in the countries Charity Exchange operates in.

Can Charities Use the Crypto Donate service to accept donations?

Yes. Charities can open a Charity Exchange account and direct donors to their charity profile page on the Charity Exchange platform. Charities can also track the incoming donations and send thank you letters to donors directly from their charity account.

How does Charity Exchange accept crypto currency? 

Charity Exchange currently accepts three types of crypto currency, BITCOIN, ETHEREUM and USDC. Donors deposit crypto currency into their Donor Advised Fund account. Once the deposit is complete, charity exchange converts the crypto currency to USDC and redeems the USDC crypto currency for the local fiat currency. In the US it is converted to USD, in Canada to CAD and in Israel to Israeli Shekels. This process helps avoid potential fluctuations in the market and stabilize the value of the crypto currency. It ensure that the charity receive the maximum financial value intended by the donor at the time of the gift.  It also allows the donor to put the funds to use immediately.

To sign up or to learn more about the matching donation program or crypto donations visit www.charity.exchange

 

 

Legal Notice: Opinions in this blog post do not reflect the opinion or endorsement of Charity Exchange or its affiliates. The opinions in this post should not be used as legal or financial advice for any financial decision. The advice or opinions shared in this blog post are solely those of the author and are not the opinion of Charity Exchange or its affiliates. For legal or financial advice, always consult with your financial advisor or legal council.

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]]> Can a US resident make a tax-deductible donation to a Canadian Charity? https://charity.exchange/blog/how-do-us-residents-make-a-tax-deductible-donation-to-a-canadian-charity/ Thu, 08 Apr 2021 16:42:16 +0000 https://charity.exchange/?p=880 How can a US resident make a tax-deductible donation to a Canadian charity or a Canadian resident make tax-deductible donation to a US charity? (part 2) Use the Charity Exchange matching donation program. Charity Exchange charitable foundation and Donor Advised Fund operates in the USA, Canada and Israel. The Foundation also offers a Global Matching … Continue reading "Can a US resident make a tax-deductible donation to a Canadian Charity?"

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]]> How can a US resident make a tax-deductible donation to a Canadian charity or a Canadian resident make tax-deductible donation to a US charity? (part 2)

Use the Charity Exchange matching donation program.

Charity Exchange charitable foundation and Donor Advised Fund operates in the USA, Canada and Israel. The Foundation also offers a Global Matching Donation program. The Global Matching Donation program is a great tool for donors to use when seeking to support global charities and charities across the border. The benefit of donating to the foundation and using the Donor Advised Fund and or the donation matching program, is that all donations are tax-deductible. Donors receive a tax-deductible receipt for funds deposited to the foundation.

How does the matching donation program work?

The concept of the global matching donation program is to pair 2 donors from different countries and match their donations. Each donor’s donation supports the other donor’s charity. Below is an example of how it works.

Justin, from Montreal Canada, wants to make $1,300 CAD donation to the American Red Cross. Justin creates a $1,300 pending donation to be matched and sent to the American Red Cross. The donation is pending on the charity exchange’s platform until a match from a US donor is found.

Joe, from Washington DC in the USA, wants to make a $1,000 USD donation to Canada’s Feed the Poor organization. Joe creates a $1,000 pending donation match to Canada’s Feed the Poor. The pending donation is instantly matched with Justin’s pending donation to the American Red Cross.

The result, Justin from Canada’s $1,300 CAD donation is sent to Canada’s Feed the Poor to support Joe from Washington’s selected charity. And Joe from Washington DC’s $1,000 USD donation is sent to the American Red Cross to support Justin from Canada’s selected charity. Essentially the donor makes a recommendation to the Donor Advised fund to donate their funds to the charity the other donor selected.

To use the donation matching program, the donor would need to open a Charity Exchange account and make a deposit / donation to the Donor Advised Fund. Once the funds are donated and cleared in the Donor’s DAF account the donor can recommend a donation to any charity in the country of residence or in the countries Charity Exchange operates in using the donation matching program.

To learn more about the donation matching program visit our FAQ page or watch a short how to video here.

 

 

Legal Notice: Opinions in this blog post do not reflect the opinion or endorsement of Charity Exchange or its affiliates. The opinions in this post should not be used as legal or financial advice for any financial decision. The advice or opinions shared in this blog post are solely those of the author and are not the opinion of Charity Exchange or its affiliates. For legal or financial advice, always consult with your financial advisor or legal council.

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]]> Global Donation Matching 101 https://charity.exchange/blog/global-donation-matching-101/ Mon, 08 Mar 2021 17:30:04 +0000 https://charity.exchange/?p=866 How does global donation matching work? In short, a donor’s gift is matched with another donor’s gift either a private donor, a business, corporation or a charity to double the donation amount. However, global donation gift matching can take on different forms depending on who is offering the program. Business and corporations When a business … Continue reading "Global Donation Matching 101"

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]]> How does global donation matching work?

In short, a donor’s gift is matched with another donor’s gift either a private donor, a business, corporation or a charity to double the donation amount. However, global donation gift matching can take on different forms depending on who is offering the program.

Business and corporations
When a business or corporation offers a donation matching program the business is seeking to encourage philanthropy and increase charitable spirit amongst their staff and employees. It also helps charities maximize the charitable income in a creative way. https://doublethedonation.com/ explains how the global donation matching program works with corporations.

Private Donors
Charities create matching donation campaign in partnership with private donors. The goal of the charity is to effectively double the impact of an individual gift. It allows both the donor and others to support the charity. The donor commits to a specific donation amount that is matched by other community donors. The benefits to the charity and donor is an increase in donation revenue and the expansion of their donor base. https://www.charidy.com/ is an online platform that helps charities and donors create matching campaigns.

Charitable foundations and non-for-profit
Charitable foundation looking to help charities offer charitable grants in order to match donations dollar-for-dollar for the duration of a fundraising campaign.

Donor Advised Funds
Charity Exchange offers a unique donation matching program for global donors. Many donors, when donating to a global charity, cannot benefit from a tax deduction if the charity is not located in their home country. Charity Exchange helps donors create a global charitable matching gift that can offer a local tax deduction for their donation. The program matches 2 donors in different countries. Each donor makes a charitable donation to a charity in their home country.  The charity in their home country is chosen by the donor in the other country. To learn more about charity Exchanges matching donation program click here.

Read about other donation matching programs in this article by https://recharity.ca/matching-gifts-guide/

 

Legal Notice: Opinions in this blog post do not reflect the opinion or endorsement of Charity Exchange or its affiliates. The opinions in this post should not be used as legal or financial advice for any financial decision. The advice or opinions shared in this blog post are solely those of the author and are not the opinion of Charity Exchange or its affiliates. For legal or financial advice, always consult with your financial advisor or legal council.

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]]> Considering Cryptocurrency Donation https://charity.exchange/blog/considering-cryptocurrency-donation/ Fri, 19 Feb 2021 18:29:14 +0000 https://charity.exchange/?p=841 Why consider donating cryptocurrency? Cryptocurrency donations are an emerging trend for charitable giving. More and more donors are looking to donate crypto to their favourite charities. In 2019 Anne Connelly published a report on the landscape of cryptocurrency donation across Canada. The report suggest that in 2019 only 4% of Canadian charities accepted donation in … Continue reading "Considering Cryptocurrency Donation"

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]]> Why consider donating cryptocurrency?

Cryptocurrency donations are an emerging trend for charitable giving. More and more donors are looking to donate crypto to their favourite charities. In 2019 Anne Connelly published a report on the landscape of cryptocurrency donation across Canada. The report suggest that in 2019 only 4% of Canadian charities accepted donation in cryptocurrency. However, the survey showed that 29% of donors have donated cryptocurrency to charity. So, the crypto donation trend is on the rise.

Can one donate Crypto to charities that do not accept Crypto?

The short answer is yes. Charity Exchange can help increase the accessibility for donors and charities to donate and accept cryptocurrency donations.

Charity Exchange accepts Cryptocurrency donations from donors. Donors can deposit their crypto donations into their Donor Advised Fund account and receive a tax-deductible receipt for the fair market value of their cryptocurrency. Donors can then (recommend and) gift the donation to any registered charity in the countries Charity Exchange operates in.

Charites can also open a Charity Exchange account and direct donors to their charity listing page and accept cryptocurrency donations through the Charity Exchange platform.

The process of how Charity Exchange accepts cryptocurrency.

Charity Exchange users can deposit cryptocurrency into their Donor Advised Fund accounts. The fund currently accepts three types of cryptocurrency, BITCOIN, ETHEREUM and USDC.

Once the crypto has been deposited to the user’s account, charity exchange converts the currency to USDC and redeems the USDC crypto for the local fiat currency. In the US we exchange it for USD, in Canada for CAD and in Israel for Israeli Shekels. This process helps avoid potential fluctuations in the market and stabilize the value of the cryptocurrency. It ensure that the charity receive the maximum financial value intended by the donor at the time of the gift.  It also allows the donor to put the funds to use immediately.

 

 

Legal Notice: Opinions in this blog post do not reflect the opinion or endorsement of Charity Exchange or its affiliates. The opinions in this post should not be used as legal or financial advice for any financial decision. The advice or opinions shared in this blog post are solely those of the author and are not the opinion of Charity Exchange or its affiliates. For legal or financial advice, always consult with your financial advisor or legal council.

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]]> Donating to American or Canadian Charities https://charity.exchange/blog/americans-looking-to-donate-to-canadian-charities-or-canadians-looking-to-donate-to-american-charities-part-2/ Mon, 15 Feb 2021 15:38:50 +0000 https://charity.exchange/?p=793 Americans looking to donate to Canadian charities or Canadians looking to donate to American charities (Part 2) In part one we discussed the advantages and the disadvantages of donating directly to charities in other countries. In part two we will discuss the option of donating to international charities through a local charity in your home … Continue reading "Donating to American or Canadian Charities"

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]]> Americans looking to donate to Canadian charities or Canadians looking to donate to American charities (Part 2)

In part one we discussed the advantages and the disadvantages of donating directly to charities in other countries. In part two we will discuss the option of donating to international charities through a local charity in your home country.

There are some charities and foundation that are setup to support international charitable activities abroad. Some of these charities and or foundations include World Vision, Against Malaria Foundation, Doctors Without Borders and many others.

Supporting international causes through these charities can offer the full tax advantage. In addition, many of these charities are running these charitable activities abroad or are intimately involve in those international charitable programs. However, most of these charities are only setup to support specific international charities or causes that they operate or choose to fund. This limits the donor’s ability to support a specific charity that may not have relations with these local charities and or foundations.

Charity Exchange’s donation matching program can help donors with its unique donation program for cross border charity. Visit the Charity Exchange  page to see how matching donations work.

 

 

Legal Notice: Opinions in this blog post do not reflect the opinion or endorsement of Charity Exchange or its affiliates. The opinions in this post should not be used as legal or financial advice for any financial decision. The advice or opinions shared in this blog post are solely those of the author and are not the opinion of Charity Exchange or its affiliates. For legal or financial advice, always consult with your financial advisor or legal council.

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]]> Cross Border and International Donations https://charity.exchange/blog/cross-border-and-international-donations/ Thu, 11 Feb 2021 20:27:25 +0000 https://charity.exchange/?p=780 How can Americans looking to donate to Canadian charities or Canadians looking to donate to American charities donate?(Part 1) What is the best way for Americans looking to donate to Canadian charities or Canadians looking to donate to American charities? There are several ways to go about cross border donations. Over the coming weeks we … Continue reading "Cross Border and International Donations"

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]]> How can Americans looking to donate to Canadian charities or Canadians looking to donate to American charities donate?(Part 1)

What is the best way for Americans looking to donate to Canadian charities or Canadians looking to donate to American charities? There are several ways to go about cross border donations. Over the coming weeks we will explore some of the options and the possible advantages and or disadvantages. In this post we will explore the most common way to donate to a charity across the border.

The most common way to donate to a charity in another country is by sending the donation directly to the designated charity on the other side of the border. For example, an American resident sends a donation to a Vancouver homeless shelter. The donor can send it by cheque, wire transfer, or credit card if the charity accepts credit cards. The advantage of this donation method is the charity receives the donation directly into their account from the donor without any intermediaries.

However, there are some disadvantages. First, the donor would need to convert the US dollar funds into CAD dollars. If the donor does not have a special FX rate with their bank or credit card the donor may pay 3-4% above the market currency exchange rate. Second, if the donors is sending a wire, there may be a significant wire fee and if the donor is paying with a credit card the charity pays up to 4% credit card processing fee. Third, although the donor may receive a Canadian tax receipt, the US donor can not use the tax receipt for a US tax deduction. (Unless the donor also files a Canadian tax return and claim the tax deduction on their Canadian earnings, in which the IRS may allow for a limited deduction in some circumstances.) As the IRS would only accept a tax receipt from US charity, not a foreign or international charity. The same apply to Canadians donating to a US charity.

Charity Exchange can help donors with its unique donation matching program for cross border donations. Visit Charity Exchange FAQ page to see how matching donation work.

Click here to read part 2 Donating to American Charities

© Charity.Exchange 02/11/2021

 

 

Legal Notice: Opinions in this blog post do not reflect the opinion or endorsement of Charity Exchange or its affiliates. The opinions in this post should not be used as legal or financial advice for any financial decision. The advice or opinions shared in this blog post are solely those of the author and are not the opinion of Charity Exchange or its affiliates. For legal or financial advice, always consult with your financial advisor or legal council.

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]]> Cross-Border Philanthropy: Obtaining a U.S. Income Tax Deduction for a Donation to a Canadian Charity https://charity.exchange/blog/cross-border-philanthropy-obtaining-a-u-s-income-tax-deduction-for-a-canadian-donation/ https://charity.exchange/blog/cross-border-philanthropy-obtaining-a-u-s-income-tax-deduction-for-a-canadian-donation/#respond Tue, 02 Feb 2021 15:21:28 +0000 https://charity.exchange/?p=564 This article examines the applicability of the U.S.-Canada Income Tax Treaty, which carves out an exception permitting deductibility if the U.S. individual has Canadian source income, and, it will discuss options for using a U.S. charity for indirect cross-border philanthropy for individuals who do not have Canadian source income.   By Catherine B. Eberl and … Continue reading "Cross-Border Philanthropy: Obtaining a U.S. Income Tax Deduction for a Donation to a Canadian Charity"

The post Cross-Border Philanthropy: Obtaining a U.S. Income Tax Deduction for a Donation to a Canadian Charity appeared first on Charity Exchange.

]]> This article examines the applicability of the U.S.-Canada Income Tax Treaty, which carves out an exception permitting deductibility if the U.S. individual has Canadian source income, and, it will discuss options for using a U.S. charity for indirect cross-border philanthropy for individuals who do not have Canadian source income.

 

By Catherine B. Eberl and Marla Waiss

While it’s easy enough to make a charitable do-nation to a Canadian charity, finding a way to deduct the contribution for U.S. income tax purposes is a much more complicated endeavor. The default rule prohibits any deduction —a U.S. citizen or res-ident (referred to as U.S. individual in this article) may not claim a U.S. income tax charitable deduction for a donation to a foreign charity. But with some advance planning, a U.S. individual may be able to secure the desired U.S. income tax deduction in spite of the default rule. This article will examine the applicability of the U.S.-Canada Income Tax Treaty, which carves out an exception permitting deductibility if the U.S. individual has Canadian source income, and, it will discuss options for using a U.S. charity for indirect cross-border philanthropy for individuals who do not have Canadian source income. The first roadblock that the U.S. individual must overcome on the road to deductibility is the same roadblock that applies to all tax-payers, regardless of whether their charitable giving is domestic or abroad. That is, to claim a chari-table deduction, the taxpayer must generally itemize his or her deductions. With the exception of the special $300 deduction allowed for tax years 2020 and 2021 (which is doubled to $600 for joint filers for 2021), if an individual does not itemize, no charitable deduction will be allowed. In 2021, the standard deduction for a single individual is $12,550. For individuals who are married and filing jointly, the standard deduction is $25,100. A taxpayer whose itemized deductions do not exceed the applicable amount will claim the standard deduction, and the rest of the con-siderations in this article become moot. Assuming that the U.S. individual intends to itemize their deductions, they must then turn to the U.S.-Canada Income Tax Treaty to determine what relief the Treaty provides to the default rule prohibiting deductions for foreign charitable contributions. While the Treaty does provide some relief, it is in-credibly limited in scope. Under the Treaty, a U.S. individual may claim a U.S. income tax deduction for contributions made to a Cana-dian charity, but (1) the deduction may only be claimed against the in-dividual’s Canadian source income, and (2) the adjusted gross income (AGI) percentage limitations that apply to domestic giving must also be applied against the individual’s Canadian source income. The Trea-ty then creates an exception to the exception, and suspends the AGI limitations for contributions to a college or university at which the U.S. individual or a member of his or her family is, or was, enrolled; even though the AGI limitations do not apply to this specific category of donations, these taxpayers must still have Canadian source income if they wish to claim a deduction for the donation to the Canadian university. Assuming that the U.S. individual has Canadian source income, the next step in the convoluted road to determining deductibility is to ascertain which AGI limitation ap-plies. A gift to a charity is generally deductible against the taxpayer’s income, but there are certain AGI limitations. For 2020 and 2021, as part of the COVID-19 relief legislation, Congress raised the AGI limitation for cash gifts to 100% of the taxpayer’s AGI if the gift is to a pub-lic charity. Prior to 2020, the de-duction was limited to 60% of the taxpayer’s AGI if the cash gift was to a public charity. A cash gift to a private foundation is still limited to 30% of the taxpayer’s AGI. A gift of publicly traded stock (provided that the stock has been held for over a year and is long term capital gain property) to a public charity is also subject to a 30% AGI limitation; if the stock is contributed to a private foundation, the limitation is reduced to 20%. Excess deductions may generally be carried over for five years. The phrases “public charity” and “private foundation” are U.S. legal concepts that are not utilized in the Canadian income tax regime. As such, the determination must be made under the U.S. rules. As a default, if the Canadian charity received a Notification of Registration from the Canada Rev-enue Agency, the IRS will automatically recognize a Canadian charity as a §501(c)(3) charity taxed as a private foundation. If the Canadian charity believes it would qualify as a §501(c)(3) public charity under the U.S. rules, and it wishes to be recognized as such (which would, among other things, allow U.S. donors to receive the larger AGI percentage limitation for deductions), it must apply to the IRS for public charity recognition. It may do so by filing a full blown Form 1023 Application for Recognition of Exemption. Or, the charity may use the short cut letter application that is available only for Canadian charities, the require-ments for which are laid out in the Form 1023 instructions. If the Ca-nadian charity has not taken either of these steps, it will be deemed to be a private foundation by the IRS, and the U.S. individual will be stuck with the lower AGI limitations applicable to donations to private foundations. The Treaty relief may be useful for U.S. individuals who live in Canada and who therefore will likely have a good deal of Canadian source income. But the average U.S. individual living in the United States does not have significant amounts of Canadian source income, and therefore will be unable to claim a deduction for a contribution di-rectly to the Canadian charity. The U.S. individual may seek out a U.S. organization which will in turn support the particular Canadian charity or mission of the Canadian charity. The three most likely op-tions are “friends of” organizations, a donor advised fund, or a private foundation. If the U.S. individual is lucky, he or she may  be pleasantly surprised to discover that the Canadian charity has already created a U.S. “friends of” organization to facilitate U.S. charitable giving. The “friends of” organization is a U.S. public charity formed for the primary purpose of supporting a specific international organization.

 The U.S. individual may make contributions to the “friends of” organization and take a full charitable deduction against worldwide income, regardless of any sourcing rules (but still sub-ject to the AGI limitations laid out above). The U.S. charity will then make grants, from time to time, to support the Canadian charity. But note that the U.S. “friends of” organization’s board has total control and decision making authority over making distributions to the Canadi-an charity, and the U.S. donor may not ear-mark the donation to be di-rectly distributed to the Canadian charity. If a U.S. “friends of” organization does not already exist, the donor could approach the Canadian char-ity about forming the U.S. organization. But the costs of forming and maintaining the “friends of” organization only make sense if the Ca-nadian charity has a broad base of support among U.S. donors who have committed to make signifi-cant, on-going charitable gifts. If a “friends of” organization does not exist, the U.S. individual can consider making the contribution via a donor advised fund. Under this option, a U.S. taxpayer would create a donor advised fund at a U.S. public charity (the Sponsoring Organization). The donor advised fund would be identified as a segregated account at the Sponsoring Organization, over which the donor would retain advisory privileges. Because the Sponsoring Organization is a U.S. public charity, the U.S. individual is credited with having made a donation to a U.S. public charity, and is entitled to a deduction against his or her worldwide income, subject to the AGI limitations applicable to gifts to public charities. As the advisor to the fund, the do-nor may request that distributions be made from the donor’s segregated fund to a Canadian charity. The Sponsoring Organization would conduct the due diligence to ensure that the potential Canadian charity is in fact a charity that is eligible to receive a charitable contribution from a U.S. public charity. Assuming the Canadian charity passes the due diligence requirements, the Sponsoring Organization will gen-erally accept the request from the advisor and make the distribution to the Canadian charity. While any donor advised fund may make in-ternational grants, there are some Sponsoring Organizations that ca-ter to international grant-making. The U.S. individual may wish to seek out one of the Sponsoring Organizations with international grant-making expertise, as the or-ganization will be comfortable per-forming the due diligence on the Canadian organization and accept-ing the advisor’s request to make the distribution. Of course, many good things come with a cost, and the Spon-soring Organization will charge a fee for administering the donor advised fund, resulting in a small-er amount of the donation going towards the ultimate intended charitable purpose. Donors who are considering the donor advised fund option must also be comfort-able with the fact that the ability to direct a distribution to the intend-ed charity is advisory only. In order for the donation to the Sponsoring Organization to be tax deductible, the donor may not retain the legal right to direct the activities of the Sponsoring Organization. Some do-nors may not be fully comfortable with the fact that their rights are advisory only, and in that case, a donor advised fund is not for them. A final option to consider for the U.S. individual looking to engage in Canadian cross-border giving is the formation of the taxpayer’s own private foundation. The U.S. individual would first make a con-tribution to the private foundation, entitling the individual to a chari-table deduction against his or her worldwide income, subject to the AGI limitations applicable to gifts to private foundations. A private foundation may then make grants to foreign organizations, if certain due diligence requirements are fulfilled. There are legal and accounting costs to form a private foundation and then to administer the private foundation on an ongoing basis. In addition, private foundations are subject to a unique set of rules and excise taxes that are intended to prevent self-dealing and other situations that are deemed to be abusive. In addition to the financial costs, the donor will also have to expend mental energy to learn and understand the private foundation rules. These costs mean that the private foundation option is best suited for individuals who are com-mitted to large scale, multi-year grant making. If an individual is looking to make a one-off contribution to a Canadian charity, the donor advised fund option will likely be a better fit, assuming a U.S. “friends of” organization is not available. While the U.S.-Canada Income Tax Treaty does offer some relief for U.S. individuals seeking a chari-table income tax deduction for a contribution to a Canadian charity, the relief is often of limited utility. Many U.S. taxpayers seeking to de-duct a contribution to a Canadian charity will only be left with the option of donating to a U.S. charity that engages in international grant-making, which may result in additional costs and complications to the donation. However, if the con-tribution is large enough, the additional effort to secure the donation may be well worth it.

Catherine B. Eberl and Marla Waiss are partners at Hodgson Russ

 

Reprinted with permission from the January 22, 2021 edition of the NEW YORK LAW JOURNAL © 2021 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-256-2472 or reprints@alm.com. # NYLJ-01262021-474791

 

 

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