Cross-Border Charitable Giving for Americans Abroad

Americans abroad should plan charitable giving by reviewing the donor’s tax position, the charity’s status, the asset being gifted and the wider financial planning objective.

A review should usually consider:

• whether the donor is a US citizen or resident alien
• whether they itemise deductions
• whether the charity is a qualified organisation for US deduction purposes
• whether the gift is to a US charity or foreign charity
• whether local tax relief is available in the country of residence
• whether a tax treaty is relevant
• whether the gift is cash, shares, funds, property or another asset
• whether appreciated assets could be gifted
• whether a donor-advised fund is appropriate
• whether an IRA qualified charitable distribution is possible
• whether the gift is part of estate planning
• whether family members should be involved in the giving strategy
• whether currency conversion affects the amount received
• whether records and receipts are sufficient

IRS Publication 526 explains how to claim deductions for charitable contributions and covers organisations qualified to receive deductible contributions.

IRS Topic 506 also states that only qualified organisations are eligible to receive tax-deductible contributions.

That means Americans abroad should not assume that every charitable gift made overseas will create the same US tax outcome as a gift to a qualified US organisation.

A charitable gift can be generous but still poorly structured.

For example:

• a gift to a foreign charity may not qualify for the US deduction expected
• a cash gift may be less efficient than gifting appreciated assets
• a donor may sell an asset, trigger tax and then donate cash when another route may have been reviewed
• a retired client may miss the opportunity to use an IRA qualified charitable distribution
• a family may make charitable gifts without coordinating estate planning
• a donor may give in one currency while the charity needs another
• a donor-advised fund may be used without understanding fees, control or eligible grants
• records may be insufficient to support the intended tax position

The aim is not to let tax drive generosity.

The aim is to make sure charitable giving supports the client’s values while fitting the wider financial plan.

For Americans abroad, that means reviewing US tax, local tax, asset type, charity status, currency, retirement planning and estate planning together.

This page is for general information only and does not constitute personalised financial, tax, legal, investment, pension transfer, retirement, estate planning, charitable, donor-advised fund, foundation, trust or currency advice.

Charitable giving, tax deductions, qualified organisations, foreign charities, donor-advised funds, appreciated assets, IRA qualified charitable distributions, local tax relief, treaties, estate planning, gifts, trusts and currency depend on personal circumstances and may change.

US tax advice should be taken from a suitably qualified US tax adviser or CPA. Local tax and legal advice should also be taken in the country where you live and where the charity is based.

Financial planning should be coordinated with legal, tax, pension and estate planning advice where appropriate.

Investing involves risk. Pension, retirement account and investment values can fall as well as rise, and you may get back less than you invest.

Currency movements can affect the value of donations, investments, transfers and income.