Families

Tax Benefits of Charitable Donations

Canada has a generous tax credit system for donors to charities. Whether it’s helping out the food bank, volunteering at a shelter, or participating in a walkathon, we Canadians are a generous bunch. Along with the terrific feeling of knowing you’ve made a difference, your donation can also yield a tax break. If you’ve been meaning to donate to your favorite charity, now’s a great time to start.

The Charitable Donations Tax Credit can be up to 33 percent of the amount you donated at the federal level. You may also be entitled to an additional amount reaching up to 24 percent of your donation depending on your province of residence. There are several of rules that determine whether you qualify.

Eligible Donations

Who qualifies for the Donation tax credit?

The CDTC is available for anyone who makes a donation to a qualifying donee. A donation is defined as a gift for which no consideration is given in return. Your donation can be money, or it can be anything else of value such as property, stocks, cultural and ecological gifts,etc.. If you receive something in exchange for your donation, such as tickets to a show, then the value of what you received must be subtracted from the amount you donated and you can only claim the CDTC for the difference. Check this CRA link for qualified donations.

What is a qualifying donee?

A qualifying donee is a registered charity or one of several other public organizations, such as an amateur athletic association, a resisted institution, a municipality, a province, or territory which can issue tax receipts. Make sure you obtain a receipt and that the donee issuing it is legally entitled to do so. The Canada Revenue Agency provides a searchable online database that allows you to confirm whether a charity is registered and eligible to issue official donation receipts. You can also determine the status of a registered charity by calling the CRA at 1-800-267-2384.

Be aware of donations schemes. Check the CRA link for tips to avoid fraud before you make the donation.

Can I claim donations made to animal charities?

Yes, you can. Did you know that the average cost for spay-neuter a cat or a dog in Canada is over $200 per surgery? Because many animal shelters operate purely on donations, every dollar helps. If you’ve donated to the Society for the Prevention of Cruelty to Animals (SPCA) or other any other charity, here are some tips for claiming your donation at tax time.

Claiming and Calculating the Credit

How can I claim my donations?

To claim your credit, report it on your federal and provincial tax return. As a rule, at the federal level, your credit will be 15 percent of the first $200 of donations and 29 percent of your additional donations. The credit can reach under certain rules 33 percent if you are in the highest tax bracket. All provinces also have similar credits, which fluctuate between 4 percent and 24 percent. The CRA provides an online tool to calculate your credit, including the provincial component. Check the CRA link to calculate how much you credit you can claim for your donations.

How does the donation credit affect my taxes?

Donations and gifts are non-refundable tax credits. This means you must claim your other credits first. If that amount is sufficient to bring your tax payable to zero, you will not be able to use your charitable donations to create or increase your tax refund. If you still have tax payable, you will be able to use all or a portion of the donation amount. You can carry forward unused donations for up to 5 years but remember that donations can be claimed only once.

Can I transfer my donation credits to my spouse or common-law partner?

Yes, charitable donations are flexible in how they’re claimed. If claiming your donations will not affect your balance owing or refund due to low income or due to claiming other deductions, you can transfer your all or some of your donations to your spouse. TurboTax standard products used for family returns will optimize the use of donations for you.

Jennifer Gorman, a Social Experience Manager at TurboTax Canada, has given some examples on how to maximize your donation credit by giving the following examples:

Penny is an animal lover. She donated $200 to the local SPCA in April. Her husband Jim made a one-time donation of $200 to the same shelter for Penny’s birthday in May.

  • If Penny claims her donation on her return and Jim claims his on his return, the credit works out to $30 each – $200 X 15% = $30 – for a total of $60.

But there’s a better way.

Because donations can be pooled for both spouses, Penny and Jim can earn themselves a bigger credit by combining the two amounts!

  • If either spouse claims the total amount, the credit works out to be $28 more. The first $200 remains at the 15% mark ($30) but the next $200 is credited at 29% ($58) – $30 + $58 = $88.

Once the provincial part of the donations credit is applied, the credit grows even more. Provincial rates vary but in Ontario, for example, the $400 combined total yields a credit of $32.42. This means that Penny and Jim’s $400 not only did a lot of good for the local shelter, it also produced a tax credit of $220.42.

 

Is there a maximum I can claim?

Yes, your total donations can be up to 75% of your net income unless you are a member of perpetual poverty. Members of perpetual poverty can donate their entire earned income and claim it as a deduction on line 25600 of their Income Tax and Benefit Return.

How can I get a list of my charitable donations?

Each charitable institution will send you a tax receipt prior to the income tax due date of your total donations for the tax year. Keep in mind that CRA might request a proof of the donations since charitable donations are on the top of the list for post-assessments. You will be required to provide a tax receipt. CRA will not accept a copy of your original bill of payment.

If you contribute to donations through your employer or pension, you will need to check your income tax slips; T4T4AT3, T5013, or T5013A slips or on partnership financial statements.

Donations From Previous Years

Since the CDTC is greater for donations higher than $200, it may be worthwhile to accumulate donations and claim them all together in the same year. There are two ways to accumulate donations: you can combine them with your spouse`s on a single tax return or you can claim donations from multiple years together in the same year. Donations can be carried forward for up to five years.

If you need to know if you have claimed donations in previous years, you can find out using the CRA’s My Account online service. Once you log into your account, click on the tax returns tab at the top of the page. From there, you can view your tax returns from previous years. Look at line 349 on your previous T1 General tax return prior to 2019 or line 34900 of your previous Income Tax and Benefit returns to determine whether you have claimed donations for each of the past five years.

If You Can’t Give Money, Give Your Time

Although volunteer work at shelters is not a taxable deduction, the result is priceless. Helping another soul feel safe and loved makes a difference in his/her life and future choices. And helping a cat or a dog increases the chance of adoption. Contact your local shelter today to find out how you can make a difference.