Charitable Tax Deductions and International Giving

By

Updated on 03/30/20

Americans gave more than $427.71 billion to charitable causes in 2018, but only 5% of that went to international causes ($22.88 billion). However, that represented an increase of 7% over the prior year.

Five percent of charitable giving for international causes seems shockingly low when compared to other countries. Many Americans think that our government spends a lot on foreign aid, so why should we worry? However, the US ranks near the bottom of all countries when it comes to international aid dollars.

Up until recently, charitable tax deductionshave been a powerful incentive for Americans to donate to charities. Now, with new tax laws, it takes a much larger donation to qualify for a deduction. However, those deductions were never allowed for international charities unless registered in the U.S. Only US domestic charities can receive tax-deductible donations.

How do you know an International charity when you see one? Typically they are called Nongovernmental Organizations (NGOs), and they are based in countries other than the U.S.

Beginning in 2018, deductions have played a diminishing role in incentivizing US citizens to give to any charity. With the standard deduction doubling for most people, only high-income earners will be able to take advantage of the charitable tax deduction.

But when it comes to helping good causes around the globe, people should be motivated by the mission, not a financial benefit.

How to Give Internationally

Many US registered nonprofits work internationally. They include well-known names such as:

Also, many American nonprofits, such as the American Red Cross, funnel money to international destinations through disaster relief or other on the ground activities.

If you do think you can take a charitable tax deduction, by all means, do so. Just check with the organizations you are considering to make sure that your contribution is tax-deductible. Look for the 501(c)(3) designation in the materials the charity provides or on its website. Charitable tax deductions can only be claimed for donations given to this type of nonprofit.

Another way to give internationally and receive a tax deduction is through a donor-advised fund. Donors can set up charitable gift accounts through a national charitable fund such as Schwab Charitable, and the Calvert Foundation.

Giving Internationally Through a Charitable Gift Account

Donor-advised funds work well for donors with at least $5,000 to invest. Contributions are tax-deductible immediately and can be "bunched" so that one can make the equivalent of several years of donations and then distribute that money over time to charities. Contributions to a donor-advised fund can be in the form of cash or securities.

The money is invested so that the donor can later contribute to the causes of his choice. The holding organizations often help screen charities and provide advice to their donor-advised clients.

Schwab Charitable recommends two ways to contribute to international causes.

One is to use charities that are based or have branches in the US, but that perform their work abroad. These types of charities include:

Doctors Without Borders, which delivers emergency medical services around the world.
Grameen Foundation USA which gives micro-loans in many countries.
American India Foundation which works on social and economic change in India.

You can also use an intermediary organization, in conjunction with your donor-advised fund, such as:

Give2Asia supports a variety of causes throughout Asia.
Rockefeller Philanthropy Advisors works in remote areas of the world.

Intermediary organizations do charge a fee, but they have many benefits, such as identifying legitimate and effective charities in other countries.

How to Find Worthy Charities That Work Internationally

If you do not have a financial institution to advise you on what charities to support, there are many ways to check them out.

Some of the better "vetting" groups include:

Charity Navigator - look for international charities on this website.

Give Well - this organization focuses on international causes and the charities that have the most impact. Evaluation is data-driven, which can be very satisfying to many people.

The Life You Can Save - founded by renowned ethicist Peter Singer, this organization also focuses on impact. Click on "Where to Give" for a list of recommended charities.

Universal Giving - connects people to volunteer and giving opportunities worldwide by ranking charities according to a trademarked "Quality Model."

This article is just for informational purposes. It is not intended to be legal advice. Check other sources, such as the IRS, and consult with legal counsel or an accountant.