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Information About Year-End Charitable Donations Taxes for Americans Living Abroad

Information About Year-End Charitable Donations Taxes for Americans Living Abroad
Ines Zemelman, EA
30 December 2014

Another tax year is coming to a close. This is the time to get your last minute donations in order before the start of a new tax year.

One of the most significant times for US Taxpayers to make charitable donations is during the holiday season. You are allowed to claim all charitable donations made throughout the calendar year on your US income tax return. Here is some important information about taking advantage of the tax benefits of donating to a charity.

Remember – in order to deduct your donation on your US expat tax return – you must have donated to a charity that is qualified by the Internal Revenue Service.

The charity to which you make donations need to be considered a qualifying charity by the IRS. You may search online for qualifying charities by using the Exempt Organization Select Check (EO Select Check) offered by the IRS. It’s important to note that you may deduct donations made to churches, government agencies, mosques, synagogues, and temples – even if they are not on the list of charities on the EO Select Check.

Deduction for donations made to the foreign charities are limited to the following 3 countries: Canada, Mexico, Israel. Charitable contribution helping people in other countries can be deducted as well - if you make it through the U.S.- registered fund that handles donations to the victims of natural disaster or war conflict in that area of the world.

There is a standard which needs to be met on clothing and household items. The only exception to this rule is if the item is valued at over $500 and is accompanied by a qualified appraisal.

All clothing and household items (including appliances, electronics, furniture, and linens) must be meet a standard of ‘good used condition or better’ in order to qualify as a deduction on your US income tax return. If you donate an item which is worth over $500, you will not be required to meet this standard if you have a qualified appraisal with your valuable item.

As a donor, you will need to acquire a written statement from the charity to which you donated for all items valued at $250 or more. The statement must include a brief description of the items donated.

If you leave a donation at a drop site which is unattended by a representative of the charity to which you are donating, make sure to make your own list of items donated and denote the fair market value for your items. If your donation is valued at more than $250, you will still need to get a written record from the charity to claim it on your US income tax return.

In order to claim monetary donation(s) on your US expat tax return, you are required to obtain either a bank record or a written statement from the charity to which you made a monetary donation. This is true for any amount – no matter how large or small.

If you make a monetary donation to a charity, you must provide the proper documentation to claim it on your US income tax return. The documentation must display the name of the charity, the date you made the contribution, and the amount you donated.

You may use bank records such as cancelled checks or your statement from your bank, credit card or credit union. If you have a statement from your bank or credit union, it should list the date, the name of the charity, and the amount contributed. If you are providing a credit card statement, it should list the name of the charity, the amount you contributed and the date the transaction was posted.

Monetary donations can be made in a variety of ways. You may pay in cash, write a check, perform an electronic funds transfer, pay with a credit card or have your charitable donation withheld from your paycheck by your employer. If you make your donation(s) via payroll deductions, you should keep pay stubs for documentation. You will also receive Form W-2 from your employer. The W-2 Form will show the total amount withheld from your paycheck to the qualifying charity, and you will also need a pledge card displaying the name of the charity to which you donated.

Even if you have all the documentation from your employer or bank or credit card statement, you are still required to present a written statement from the charity to which you donated if the donation was valued at $250 or more. If you have a written statement that includes all of the information required, then both requirements will be met.

You may only deduct your charitable donations for the year in which they were made. If you make a donation in 2015, you must claim it when you file your US income tax return in 2016.

Any donation you make in 2014 is deductible on your US income tax return when you file in 2015. This includes donations made on a credit card. As long as the transaction posting date is in 2014, you are able to claim the donation on your US expat tax return – even if you don’t pay the credit card bill until 2015.

The deduction for charitable donations is only available to those who itemize their deductions on Schedule A. If you are claiming a standard deduction, you will not be able to deduct any donations to charity.

When it comes to filing your US income tax return, you have the choice of either claiming the standard deduction made available to you by the IRS or itemizing your deductions on Schedule A. Deductions on Schedule A include charitable donations, state and local taxes paid, mortgage interest, medical expenses, and a variety of other deductions. It will not be of benefit to you to file Schedule A if your itemized deductions do not exceed the amount offered through the standard deduction. If you do not have enough itemized deductions to justify filling out a Schedule A, then you will not be able to claim your charitable donations.

There are other special rules that apply for donations over $500 and donations of airplanes, boats or vehicles.

If you donate an airplane, a boat or a vehicle to a qualifying charity and the amount you are deducting is more than $500, you are only able to claim an amount equal to the proceeds of the sale of the vehicle after it was donated. To claim a deduction of more than $500, you must file Form 1098-C. Form 1098-C should be provided for you by the charity to which your donation was made. If you are not given Form 1098-C specifically, you must present similar documentation with your US income tax return in order to claim a deduction.

If the value of your non-cash donation is more than $500, you will need to complete Form 8283 and attach it to Form 1040.

Ines Zemelman, EA
founder of Taxes for Expats