2016/2017 Changes to the Québec Tax Credit for Charitable Giving

By Rob Cosman, Partner, Jones & Cosman Chartered Professional Accountants

As of the 2016 tax year, Revenu Québec has eliminated income-based limits on the tax credit for charitable giving, and even more changes are scheduled for the 2017 tax year. It’s important to understand the changes so you can strategize your giving and get your maximum tax refund.

An Overview of the Charitable Giving Tax Credit

Revenu Québec offers a non-refundable tax credit for charitable giving. The credit is worth 20% of the first $200 you donate and 24% of all other donations. If you don’t use the entire credit, you may carry it forward for five tax years.

For example, if you report $10,000 in charitable donations on your tax return in 2016, you receive a 20 percent credit or $40 for the first $200. The remaining $9,800 triggers an additional credit of $2,352, making the total credit $2,392.
To claim the credit, add up all of the donations you have made to eligible charities during the tax year. Then, multiply the percentage noted above. The result is your tax credit, which is subtracted from your tax bill to reduce the amount you owe. However, as a non-refundable credit, it does not trigger a refund.

Changes to Income-Based Limits

In previous tax years, residents of Québec were only allowed to report up to 75% of their net income as charitable donations. For example, if you had a net income of $100,000, you were only allowed to report $75,000 in charitable donations. There were a few exceptions to this rule, namely for people who had taken eternal vows of poverty.

However, as of the 2016 tax year, that limit is gone. As a result, taxpayers may report the entire amount of their charitable gifts on their tax return without respect to their incomes. However, in some cases, taxpayers are allowed to report more than the value of their gifts.

New Rules for Food Donations From Farmers

As of March 26, 2015, if you are a recognized agricultural producer and have donated food products to a registered charity, you may increase the amount of your donation by 50 percent. For instance, if you donated $10,000 in food, you could report a $15,000 donation on your tax return.

To determine the fair market value of the food you have donated, you must have a certificate issued by the Ministère de la Culture et des Communications.

Increased Donation Amounts for Cultural Gifts

If you donated a cultural gift, you may also increase the amount of your claim. If you donated a building to be used as artists studios or to house cultural organizations, you may be able to increase the value of your donation by 25 percent on your return. To qualify for the increase, your gift must have been to a registered charity, a municipality in Quebec, a registered cultural or communications organization, or a registered museum.

Similarly, if you gifted a public work of art to an eligible charity or organization, you may be eligible to increase the value of that gift by 25 or 50 percent. To qualify for the increase, you must have a certificate detailing the fair market value of the art.
If you gave the work of art to the Québec government, to a municipality in Québecor any other public body performing governmental functions in Quebec, you are eligible for the 25 percent increase. However, if you gave the art to a school or a registered charity focusing on education, you can claim a 50 percent increase.

Scheduled Changes for 2017

In the 2017 tax year, the charitable donations tax credit will experience even more changes. For 2017, Revenu Québec still plans to apply a 20% rate to the first $200 of any donation as well as to any donations less than this amount. However, the rest of the calculations are slightly different.

In particular, if a taxpayer has income in the fourth tax bracket, his donations up to that amount are multiplied by 25.75 when calculating the tax credit. All of the donations that do not fall into either of those categories receive a 24 percent rate.

As an illustration, imagine all earnings over $100,000 fall into Quebec’s fourth tax bracket, and a taxpayer has a net income of $110,000. As a result, $10,000 of his earnings fall into the fourth bracket. He has also donated $15,000 to registered charities. In this case, the first $200 of those donations receive the 20 percent rate, and $10,000 of his donations receive the 25.75 percent rate. Finally, the remaining $4,800 falls into the 24 percent category. This earns the taxpayer a credit of $3,767.
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