Canadian tax laws allow people who donate to charity to receive a tax credit for these donations. In order to entice people who have not donated in a long time, or have never donated, the government has created the First-Time Donor Super Credit that provides qualifying donors with an extra tax credit worth up to 25 percent of their donation.
Basic Rules for Charitable Donations
The Charitable Donations Tax Credit is designed to provide a tax incentive for Canadians to donate to charities. It can reach up to 29 percent of the value of the donation, along with additional amounts that vary from province to province, but go up as high as 24 percent.
It is very important to make sure that the charity you are giving to is registered with the Canada Revenue Agency and issues a receipt to you. If you want to verify the validity of the receipt, the CRA provides an online tool where you can enter the charity’s registration number and verify its status.
As a rule, it is best to group donations among spouses to maximize the credit, since donations below $200 are eligible for a 15 percent credit while those over that limit get a credit of 29 percent.
First-Time Donor Super Credit
The FTDSC offers another way for philanthropic taxpayers to increase the value they would normally earn through the CDTC. It gives new donors an additional 25 percent credit, in addition to the basic federal and provincial credit, on qualifying donations to registered charities.
Contrary to what the name implies, you do not necessarily have to be a true first-time donor to qualify. Anyone who has not claimed a charitable donation since 2007 is deemed to be a first-time donor and can qualify for the FDSC.
The credit applies only to a gift of money, as opposed to gifts of property or services, made after March 20, 2013, up to a maximum of $1,000, and can only be claimed in a single year from 2013 to 2017. If you have a spouse or common-law partner, you can share the claim for the FDSC, but the total combined donations claimed cannot be more than $1,000.
Example of Credit
If you qualify as a first-time donor, your actual out of pocket cost for your donation may be end up being quite small. Assume you give $1,000 in cash to a registered charity and that the rate of your provincial credit is 20 percent. Your tax credits will add up to $712, calculated as follows:
- On the first $200, the federal credit is 15 percent, or $30
- On the next $800, the federal credit is 29 percent or $232
- Your FDSC is 25 percent of $1,000 or $250
- Your Provincial credit is 20 percent of $1,000 or $200
Once all of the credits have been calculated, your out-of-pocket cost of a $1,000 donation is only $288.