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Suppose Gordon is a Canadian citizen resident who is also a US citizen.

Gordon earns $1,000,000 a year in net income from his Canadian executive job. He pays an overall rate of 40% in taxes.

Gordon makes a large donation of $100,000 to his local youth hockey association. The charity is recognized by the Canada Revenue Agency but has no status with the IRS.

In Canada, Gordon will receive a tax credit against his donation, for example, let's say it'll be $40,000. So rather than paying $400,000 in taxes, he will pay $360,000.

My question is, will Gordon owe any additional U.S. taxes, since as far as the U.S. is concerned, he earned $1,000,000 and there are no charitable deductions/credits?

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US tax treaties with Canada, Mexico and Israel provide for charitable donations. For Canada see publication 597 on the website or downloadable. You must have Canadian income to deduct from (which your Q does) and the donee "must meet the qualifications that a U.S. charitable organization must meet under U.S. tax law." This is somewhat vague, but the instructions for form 1023 are clearer; CRA-registered charities "are automatically recognized as section 501(c)(3) organizations". US gives a deduction, which has different value depending on your marginal rate(s), and only if you itemize, which in this case you would.

One possible caveat: If this league operates at a college or university, there is a specific restriction on donations where you get ticket 'rights' as a benefit; see pub 526 at "Athletic events".

However, handling of charitable donations is not the only possible difference between Canadian and US taxation, and whether Gordon actually ends up owing US tax (after paying Canadian tax since they get first crack) may depend on other elements not in your Q.

  • Thanks for the detailed answer! (btw does it really take that much longer to write "question" instead of just "Q"?) – SammyS Mar 18 '18 at 0:48

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