Normally, for a donation to qualify for a Canadian tax credit, it must be made to a registered Canadian charity and supported by an official donation receipt that includes a registration number. That’s the standard rule most people know.

But supporting causes you care about often extends beyond borders. Many Canadians wonder, can I claim a Canadian donation tax credit for my gift to a U.S. charity?

Since these organizations aren’t registered charities in Canada, and their receipts won’t carry a Canadian registration number, many assume that the answer to that question is no. the rules work a little differently. The answer is actually yes—but the rules are specific, and it’s important to understand when your donation will qualify. In this blog, we will break down how this works, and when you can claim a credit.
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Two Key Requirements

To claim a Canadian charitable donation tax credit for a gift to a U.S. charity, two conditions must be met:

1. The Charity Must Qualify
   The U.S. charity must be exempt from U.S. tax, and
   It must be the type of organization that would qualify as a registered charity if it were created in Canada.
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2. You Must Have U.S.-Sourced Income
   The donation amount you claim can’t exceed 75% of your net U.S.-sourced income reported on your Canadian tax return.
   Example: If you have $1,000 of net U.S.-sourced income, you can claim up to $750 of U.S. charitable donations.

What Counts as U.S.-Sourced Income?

Common examples include:

• Dividends from U.S. stocks
• Rental income from U.S. real estate
• The taxable portion of a capital gain (50% inclusion) from selling a U.S. asset, such as stock or property

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What About ETFs and Mutual Funds?

This is where things get tricky:

• Canadian-listed ETFs or mutual funds that hold U.S. stocks (e.g., Vanguard’s VFV) – dividends and interest qualify as U.S.-sourced, but capital gains do not.
• U.S.-listed ETFs (e.g., Vanguard’s VOO) – both income and taxable capital gains count as U.S.-sourced, since the fund itself trades on a U.S. exchange.

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Carrying Forward Donations

If your U.S.-sourced income is too low to use the full value of your donation this year, you don’t lose the credit. Unused U.S. donations can be carried forward for up to five years.

This makes timing important: you may choose to defer claiming your donation until a year when you expect higher U.S.-sourced income—such as when realizing a large capital gain.

Important Exceptions

Normally, your claim is limited to 75% of your net U.S.-source income. However, you may claim up to 75% of your net worldwide income if all the below are true:

• Your gift is deductible under U.S. tax law, and
• You lived in Canada near the border all year,
• You regularly commuted to work or run a business in the U.S., and
• That U.S. income was your main source of income.

Additionally, the U.S.-source restriction does not apply if your donation is to:

• A U.S. college or university where you or a family member is/was enrolled, or
• A U.S. university listed on the CRA’s roster of qualified donees found here: List of universities outside Canada registered as qualified donees - Canada.ca

Other Considerations

Holding U.S.-listed investments to maximize donation eligibility comes with additional obligations:

• Assets are in USD, creating currency exposure.
• If your cost base exceeds $100,000 CAD, you must file the T1135 Foreign Income Verification Statement each year.
• If you pass away owning more than $60,000 USD of U.S. assets, your estate may have to file a U.S. estate tax return.

The Bottom Line

Donating to a U.S. charity from Canada can be an effective way to support causes that matter to you while receiving a Canadian tax credit. But your ability to claim—and the amount you can claim—depends on:

• The type of charity,
• Your U.S.-sourced income, and
• How your investments and giving strategy are structured.

At TIER Wealth, we help clients align their tax, investment, estate, and retirement planning with their philanthropic goals. That includes structuring cross-border giving in the most efficient way possible, while staying mindful of tax reporting obligations.

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Sources

• Income Tax Folio S5-F2-C1: Foreign Tax Credit (CRA)

• P113 Gifts and Income Tax (CRA)

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