Cross-Border Donating – Impact Beyond Borders

Charitable giving is an excellent way to give back to beloved causes, and for both Canadian and U.S. tax purposes, provides generous tax benefits. However, cross-border donation matters can introduce some complexities.

Canadian Donation Tax Rules

For individuals, donations to registered Canadian charities provide a non-refundable donation tax credit, reducing your Canadian tax liability based on the value of the donation and the applicable federal and provincial donation tax credit rates. Donations made in excess of $200 benefit from higher tax credit rates than other types of credits, and can even exceed 50% depending on your income level and province of residency

You can claim a donation credit on gifts up to 75% of your net income, except in the year of death, where a credit can be claimed on donations for up to 100% of net income. Unused credits can be carried forward for up to five years and applied against future tax liabilities.

U.S. Donation Tax Rules

For U.S. tax purposes, charitable contributions to qualified tax-exempt nonprofit organizations are treated as itemized deductions, rather than tax credits. U.S. persons¹  generally only benefit from itemized deductions on their U.S. tax return if their total deductions exceed the standard deduction. However, effective in 2026, if you will claim the standard deduction instead of itemized, you can deduct up to $1,000 if you’re a single filer, or up to $2,000 for joint filers, for charitable contributions made to eligible charities.

The deductibility of a charitable gift depends on the type of donation (cash, non-cash, or appreciated property) and the recipient organization. Deduction limits range from 20% to 60% of your U.S. adjusted gross income (AGI).

If you make donations in excess of the percentage limit applicable to the type of donation, the excess can be carried forward for five years and deducted in a future year instead.

Cross Border Donations

What happens however, when a U.S. person wishes to gift to a Canadian charity, or a Canadian resident wishes to gift to a U.S. charity?

Under domestic rules in both Canada and the U.S., tax relief is generally only available when donating to a domestic charity (i.e., a registered Canadian charity when claiming a donation on your Canadian tax return, or a U.S. qualified organization on your U.S. tax return).

However, Article XXI of the Canada-U.S. tax treaty addresses this issue:

• As a U.S. persons living in Canada: You can donate to Canadian registered charities and get a U.S. itemized tax deduction based on the fair market value of donated, up to a percentage – generally 30% or 50%, of your Canadian sourced income². Canadian sourced income could be Canadian employment income, Canadian retirement income, Canadian dividends, interest income, and most capital gains.
That could mean that you will not only get a donation tax credit on your Canadian tax return but could also get the U.S. itemized tax deduction for donations to Canadian registered charities.
• As a Canadian tax resident: You can benefit from a donation tax credit for donations made to U.S. charities, provided the donation does not exceed 75% of your U.S. sourced income, such as U.S. dividends, U.S. employment income or U.S. retirement income.

A Better Way to Donate – Publicly Traded Securities

While most donors think of giving cash, a more tax-efficient strategy on both sides of the border is to donate appreciated publicly traded securities in-kind directly to the charity.

This approach provides two main benefits:

1. Avoidance of capital gains tax on the appreciation of the securities (0% inclusion rate in Canada for capital gains, and no capital gains for U.S. tax purposes for securities that were held for over 1 year)
2. A donation credit (in Canada) or deduction (in the U.S.) based on the fair market value of the securities

Under Canadian tax rules, donations to qualified donees of eligible properties, which includes shares of publicly traded companies, qualify for a 0% inclusion rate on the accrued capital gains. This compares to the 50% inclusion rate for capital gains when investments are otherwise disposed of, such as by way of selling the assets or gifting to someone other than a spouse or common-law partner. Qualified donees include Canadian registered charities but may not include U.S. charities. Therefore, if you live in Canada and wish to donate appreciated securities in-kind, you may need to donate to a Canadian charity to benefit from the 0% inclusion rate on the accrued gains.

Using a Donor Advised Fund

If you’re looking to make more substantial donations and even leave a legacy that proceeds your life, a Canadian Donor Advised Fund (DAF) could be a very useful tool. Raymond James Canada Foundation is a registered Canadian charity and allows you to benefit from the donation rules outlined above, including donation tax credits in Canada, deductions in the U.S., and no capital gains tax on in-kind donations.

With a Raymond James Charitable Giving Fund, the investments in the fund are managed by your financial advisor for the benefit of your charity, with periodic grants made to Canadian charities of your choice.

Conclusion

While tax breaks aren’t generally the driving force behind those looking to give back, they are certainly a helpful factor.

If you’re looking to make an impact and are impacted by cross-border donation tax rules, reach out to your Raymond James financial advisor, who can work together with our cross-border tax consultants to help you come up with a strategy to maximize the benefit of your gifting.

¹ A U.S. person is a U.S. citizen, green card holder, or U.S. resident who meets the Substantial Presence Test.
² https://www.irs.gov/pub/irs-tege/eotopicc01.pdf