The Canadian tax system offers non-refundable tax credits for individuals who wish to make donations to charitable organizations. In the 2013 budget, the country’s government introduced a temporary supplement to encourage additional non-refundable tax credits for first-time donors called the First-Time Donor’s Super Credit.
Under the current system, charitable donations are given a two-tier credit. The first $200 worth of donations for the year, across all charities, gives a you a 15 percent federal tax credit, which is worth about 25 percent when the provincial tax is taken into account. Any amounts over the $200 level give you a 29 percent federal tax credit, worth about 45 percent when you factor in provincial tax.
The super credit started in the 2013 tax year and is listed as only temporary for the 2013 to 2017 tax years. This credit results in an additional 25 percent to the aforementioned federal rates. For the first $200, you receive the old 15 percent plus another 25 percent worth of credit. For amounts over $200, the amount would be the 29 percent plus another 25 percent federal credit.
The maximum contribution that qualifies for the super credit is $1,000. Any amount over that $1,000 does not receive the additional credit.
To be considered a first-time donor, you, a spouse or your common-law partner must not have claimed the charitable donations tax credit in the past five years. If you or your spouse meet this criterion, the FDSC can be split between you, but it cannot exceed a combined amount of $1,000. To qualify for this credit, donations must be made after March 20, 2013. Only donations of cash qualify for the extra FDSC credit.
Consider holding on to charitable donations without claiming them in the current year if the amounts are smaller and wouldn’t be as beneficial as a donation claim over the $200 threshold. Combine multiple years and donations from a spouse and claim them in a single year to get a larger credit and over the $200 threshold.
If you were planning to make a donation in January, consider pulling it into December to increase your pool for the year. Unclaimed donations can only go back five years, so don’t wait too long.
This is a non-refundable credit, so it only reduces tax amounts owed. If you do not owe any tax, you do not want to claim this super credit.
Claim amounts of donations up to a limit of 75 percent of your net income; for certain certified cultural property or ecologically sensitive land, you may claim up to 100 percent of your net income.
Look at donations that are not just cash, but shares of publicly traded securities, artwork or real estate. These have more complex rules around the tax treatment. However, the benefit received is often greater than the original cost of the items, and the tax benefit can be more advantageous to you.
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