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UK to US Charitable Giving

Americans are by definition generous givers to worthy causes. According to the “Giving USA Report” prepared annually by the University of Indiana, Americans give 3 to 7 times more than Western Europeans. In 2012, Americans gave $316 billion to various cultural, religious, humanitarian and educational causes or an average of $2,000 for every household. In addition half of American adults volunteer their time.*

The UK encourages philanthropy by allowing a charity to obtain Gift Aid from the government on any donation made by a UK tax payer as well as allowing Higher Rate taxpayers to reclaim the basic rate of tax on any donation.

The US will generally allow you to take a tax deduction for up to 50% of your total qualified donations in any one year. This limitation may be reduced to 30% or 20% for gifts of certain kinds of property; or 20% under the “phase-out” rule for itemized deductions for higher earners.  These rules are very complex and you should seek the assistance of a professional US tax advisor.

The dilemma for a potential donor living in the UK and paying tax in both the UK and the US is that the tax treatment of charitable gifts is not joined up, especially when the donor would like to make a gift to a US charity.  This is where dual qualified charities such as the Anglo-American Charity and its US parent the Anglo American Charitable Foundation can help.  By making your donations through a dual qualified charity a donor can increase the value of their gift and reduce their taxable income.

As an example, Sue Smith, a higher rate taxpayer, wants to give her alma mater $25,000. If she does so through a dual qualified charity, the process is as follows:

  • Sue will write a check for $20,600 (or the Sterling equivalent)
  • The charity will reclaim the Sterling equivalent of $5,150 from the UK government
  • After deducting its fee, the charity will make a gift of $25,000 through its parent to Sue’s alma mater.
  • Sue can reclaim the basic rate of tax paid on the donation from the UK government.
  • Sue will receive acknowledgements from both the US and UK charities for the amounts of the gifts she has made.

The Anglo-American Charity Limited and the Anglo-American Charitable Foundation were established in 2003 as dual qualified US-UK donor advised funds to facilitate trans-Atlantic gifting and to provide an alternative to CAF America.

Tanager Wealth Management was established by two US expats to help other Americans living in the UK. The firm provides wealth counseling and investment advisory services to Americans and other US taxpayers both here in the UK and in the USA.

More information on gifts of over $1,000 can be found from Anglo-American Charity Limited.

* Giving USA: The Annual Report on Philanthropy, a publication of Giving USA Foundation™, researched and written by the Indiana University Lilly Family School of Philanthropy.

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