How to Get US Charitable Deductions for Donating to non-US Charities

Every year, Americans donate a considerable amount of funds to non-profit organizations that thrive to work for the betterment of the people and society. In the year 2017, the total funds donated within the US were estimated to be $410 billion, which is impressive. The charities made to non-profit organizations helped in the betterment of individuals and societies that are in dire need.

Despite such efforts in terms of donation, some Americans feel that restrictions on donating to non-US charities restrict their freedom to freely donate. In fact, considering the charities made in 2017 by US residents, only 4.4 percent accounts for non-US donations. No doubt the major reason for such low contributions to non-US charities is that a US resident must donate to a US charity or else the charitable deduction is not available. Only the non-US charities that have a US presence which qualifies under the 501(3)(c) status can raise funds in the USA while offering tax deductions to the US donors.

Non-US organizations can get the status of 501(3)(c) from the IRS, but the process is complex and time-consuming. Moreover, there are certain conditions that an international charity has to meet in order to gain the status. We discussed this topic with a US tax adviser based outside the US, Matthew Ledvina, on the particulars of applying for 501(3)(c) status. Many non-US charities would like to access the US charitable donations of US donors, and this is the best possibility of doing so.

International Donations through US Non-profit Organizations

It is possible for US individuals and US organizations to make donations to non-US charities that are not registered to the US, but it is extremely rare. Usually, individuals donate only to charitable organizations that are eligible for tax dedications. As a solution to donating to a non-US charity directly, donors can givefunds to US non-profit organizations that work on a global level. The biggest advantage of doing so is that if the non-profit organization has the 501(3)(c) status, then the US tax deduction will be applicable and US donors will get a charitable tax deductions on their contributions.

It is quite important to address that the recent changes in the tax laws have made it difficult for US individuals to give charities. With the revised tax laws introduced in 2018, the standard tax deduction is higher than what it was before. As a result, tax deductions have become unreachable for people having average incomes.

Donations through Charitable Gift Accounts

Another possible way for making overseas donations and get tax deductions is through donor-advised funds. For funding on-US charitable organizations, the donor needs to set up a charitable gift account, which can be done through a national charitable fund. One important thing to keep in mind is that a donor-advised fund is an ideal option for donors who can make donations of at least $5,000.

Apart from offering immediate tax deductions, it is also possible to invest a large sum of money in the gift account that can be disbursed to charities at regular intervals. The organization that holds the investments also provide advice to the donors and recommends charities based on the area of their work such as healthcare, human development, environment, etc. Moreover, donor advised features allows donors to make contributions in the form of cash or securities.

The yearly donations made by the Americans are commendable and is increasing year by year. However, when it comes to international causes, the contributions are not that much. One of the major reasons for such mismatch is the lack of in on-US charitable organizations that are eligible for tax exemptions. However, by making donations through US charities that work internationally or charitable gift accounts, it is possible for donors to get tax deductions.

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