View Full Version : Tax deduction for charitable contributions on Bonaire

Bruce Z
08-20-2015, 03:38 PM
US retiree expats that file a Bonaire resident tax return generally have little or no tax to pay on Bonaire due to the double tax decree exclusions. If you are over retirement age the tax is normally about $150. If you are retired but under retirement age the maximum tax is closer to $8,000. If you are not retired or if the type of income you have does not qualify for the benefits of the double tax decree the tax rate is 30.4% over the Bonaire equivalent of a standard deduction (called Belastingvrijesom), about $13,000.

If you do have tax to pay, there are certain deductions people can claim on Bonaire to reduce their taxes. The most typical ones I see are maintenance costs on your home (up to $1,676), interest expense, usually from a mortgage (up to $15,364), and the fire and natural disaster insurance premium on your home.

One that most people are not aware of is the charitable contribution deduction. If you give money to a Bonaire charity, you normally cannot get a deduction on your US tax return for that contribution. But you might get a deduction on Bonaire. The limitations are very different from the US rules however, which generally allow up to 50% of Adjusted Gross Income to be deducted. (In over 30 years of doing US tax returns I have only had one client reach this limitation.) The Bonaire deduction is allowed to the extent the total gifts exceed 1% of your gross income. The excess over that floor is then subject to a maximum of 3% of your gross income.

So assume you earned a salary or had other non-decree qualifying income of $30,000 on Bonaire and had a Social Security pension from the US of another $20,000. The US social security will qualify for the double tax decree, but you will be in the 30.4% tax bracket and you can save some taxes by donating to charity. The 1% floor in this case is $500 (so thereís no tax benefit for amounts below this) and the maximum deduction is $1,500. So you could give $2,000 to Bonaire charities and it would reduce your taxes by $456. Your net cost of the $2,000 contributions would be $1,544. There is no tax benefit for a deduction over the 3% amount; donít you think this law should be changed?

So give to Bonaire charities, keep those receipts and claim a deduction on your tax return!

The above is provided as general information, not as specific tax advice. Your unique situation needs to be reviewed on an individual basis of course.