Families

How to Calculate the Charitable Donation Tax Credit

Before claiming the charitable tax credit, it’s important to make sure you have donated to a qualified charity. Once you have confirmed that your donation is eligible for the tax credit, you must calculate the amount of charitable tax credit that you are claiming. You can claim donations made on or before Dec. 31 in the same tax year. You can also claim any donation amounts not claimed by you or your spouse or common-lay partner in the past five years.

How To Calculate the Charitable Tax Credit

  • You can’t always claim the full value of gifts given to charities. Instead, you are limited to claiming gifts up to 75 percent of your net income in most cases. The exception to the 75% rule is for gifts of either certified cultural property or ecologically sensitive land. You can claim a maximum of 100 percent of your net income for these types of gifts.
  • Once you have determined the amount eligible for the charitable tax credit, you can use the Canada Revenue Agency’s charitable donation tax credit rates table to determine the actual tax credit amount. There are separate rates tables for federal and provincial donations.
  • If you donate $200 or more, you qualify for a higher rate. This means that you are eligible for a tax credit worth 15 percent on the first $200 donated, plus a tax credit worth 29 percent on any amount above $200.

For example, if you donate $200, you receive a tax credit worth $30 (15 percent of $200). However, if you donate $500, you receive the same $30 tax credit, plus a tax credit worth $87 on the amount above $200 ($500 – $200 = $300 x 29 percent = $87), for a total tax credit of $117 ($30 + $87). This tax credit helps to lower your taxes payable.

First-Time Donor’s Tax Credit

If you’re donating for the first time, you can claim the first-time donor’s tax credit. As a first-time donor, you can claim an extra federal tax credit of 25 percent on your first $1,000 of donations. This works out to be the equivalent of a tax credit of 40 percent on your first $200 in donations, and 54 percent on amounts above $200. Only cash donations qualify for the first-time donor’s tax credit.

How To Maximize Your Donor’s Tax Credit

  • If you donated less than $200 in the tax year, it might be worthwhile to hold off on claiming a tax credit until a future tax year. If you make charitable donations in future years, you can combine donations as far back as five years to help push you over $200 and claim the higher tax credit.
  • Try to make your charitable donations before the end of the year, instead of waiting until the new year, as this will allow you to claim them much sooner and take advantage of the tax credit.
  • If you have a spouse or common-law partner, you can combine your donations and claim them on one tax return to push you above the $200 threshold. The higher-income partner should claim the charitable donations tax credit, as it helps to reduce surtaxes on federal and provincial taxes.