It’s not a secret that generosity towards charitable organizations can pay off when tax time comes around. If you regularly itemize your deductions or plan to make large contributions during a particular tax year, money and property that is donated may be deductible for your US expat taxes. Extensive information on the subject is available in IRS Publication 526.
Recommendations for Tax-Deductible Giving
The IRS recently published six tips for taxpayers who want to ensure their charitable giving is tax-deductible. This advice may just save you on your US expat taxes!
Tip 1: Make sure the charity is tax-exempt.
The charity should be able to tell you whether it’s tax-exempt by IRS standards, but if you’d rather confirm this for yourself, use the Exempt Organizations Select Check on the irs.gov website.
Tip 2: Itemize using the correct form.
To apply charitable donations to your US expat taxes, you must use Form 1040, Schedule A.
Tip 3: You can only claim market value.
Great-aunt Sally’s piano may have held a million priceless memories for you, but if the fair market value is $500, you can’t claim a value of $1,000 for sentimental reasons. Likewise, if you make a donation of cash or goods and receive something in return – for example, a pledge drive where a donation of $50 entitles you to a gift worth $15 – you can only claim the difference between the amount you gave and what you got in return. In this example, you’d have to claim $35 ($50 – $15).
Tip 4: Keep records of what you give.
Even the smallest donation must be documented in some way. Thankfully, payroll deductions, canceled checks, and credit card statements work for most small donations, as do receipts given by the charity. It’s important that the record state the name of the organization, the date the donation was made, and the amount that was donated.
Tip 5: Larger donations require slightly more record-keeping.
For larger donations (those valued at $250 and up), you will need a written statement from the organization. This should include the organization’s name, the date the donation was made, amount of cash given or the fair market value of goods received, and whether any goods or services were provided to you by the charity in exchange for your donation. Should your donation be an item valued at $500 or more, you will need to fill out Form 8283. If the non-cash item (such as a car) is valued at over $5,000, you will be expected to obtain a property appraisal, a copy of which should be included with your Form 8283.
Tip 6: Timing is everything.
As a general rule, your contributions only count for the tax year in which the charitable organization actually receives your money. If you pledge to donate $1,000 in installments to a favorite charity, but only send $800 by December 31, you can only claim $800 on that year’s US expat taxes. The $200 you donate in January will apply to the following year’s expatriate tax returns.
Need Help With Your US Expat Taxes?
Many more exemptions, deductions and savings can be found in our “US Expat Taxes Explained” series. If you’re confused or unsure about your US expat taxes or obligations with respect to charitable giving or itemizing your deductions, consult an expat CPA for professional advice. For more information on IRS requirements, Schedule A for itemized deductions, or to learn about our services for US expat taxes in general, please contact us.