Tax Benefits of Charitable Donations

What is a charitable donation tax credit?

A charitable donation tax credit is a tax credit that helps you reduce your tax liability, thus reducing the amount of taxes you pay. This means you can support causes you care about while getting a tax break at the same time.

Simply save your donation receipts, and you can qualify for a federal tax credit of 15% of the first $200 of donations and 29% of your additional donations. The credit can be up to 33% if you are in the highest tax bracket.

In addition to the federal tax credit, you can get from 4% to 25.75% provincial or territorial credits. The rates vary from one province to another.

Donations to your favorite causes qualify for tax credits as long as the entity you donate to is a registered charity or one of several other public organizations, such as an amateur athletic association or a municipal body.

The Canada Revenue Agency (CRA) 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.

Beware of donation schemes. Before you make a donation, check the CRA link for tips to avoid fraud.

How do charitable donations affect taxes in Canada?

Charitable tax donations are nonrefundable tax credits that can help reduce the amount of taxes you owe. While some tax credits can create a refund, this one does not. This means qualified donations result in tax credits—not deductions.

If the amount of your other credits is sufficient to bring your tax payable to zero, you will not be able to use your charitable donations to generate or increase your tax refund after filing your return. If you still have tax payable, you can use all or a portion of the donation amount to reduce it.

If you have unused donation tax credits left over, you can carry them forward for up to 5 years. But remember: Donations can be claimed only once.

What are some examples of charities that qualify for a donation tax credit?

A large number of charities qualify for this tax credit. Here’s a short list of organization types:

• Medical research foundations
• Homeless outreach and shelters
• Universities
• Art foundations
• Animal charities, such as shelters
• Canadian amateur athletic associations
• Registered journalism organizations
• Low-cost housing corporations for the aged

You can search for specific charities with this free CRA search tool.

Can I claim charitable donations on my taxes?

You can claim the full charitable donation as long as you made the donation to a qualifying entity and nothing was received in return. 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 would claim the charity donation tax credit only for the difference.

A donation is a gift. It can be in the form of money, or it can be anything else of value, such as property, stocks, cultural and ecological gifts, etc.

To claim your credit, report it on your federal and provincial tax returns.

Check this CRA link to calculate how much credit you can claim for your donations.

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

Yes, charitable donations can be flexible in how they are claimed. If claiming your donations will not affect your tax bill or refund, you can transfer all or some of your donations to your spouse.

Let’s look at some examples of how to maximize your donation credit, using these fictitious scenarios:

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 federal credit of 15% works out to $30 each ($200 x 0.15 = $30), for a total of $60 ($30+$30=$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 is credited at 15% ($30), but the next $200 is credited at 29%, which results in a total credit of $88. ($200 x 0.29 = $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, they’d get an additional 5.05% and 11.16%, for an extra $32.42. The first $200 yields 5.05% and the second, 11.16% ($200 x .0505 = $10.10; $200 x .1116 = $22.32; $10.10 + $22.32 = $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 $120.42 ($30 + $58 federal + $32.42 provincial = $120.42).

Can I claim charitable donations tax credits from previous years?

You can, and sometimes doing so provides a great strategic advantage. The charitable donations tax credit is higher for donations above $200. So if you accumulate donations and claim them all together in the same year, you’ll receive a bigger credit.

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 one specific year. Donations can be carried forward for up to five years.

If you need to know whether you have claimed donations in previous years, you can find out using the CRA’s My Account online service. Once you log in to 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 T1 General tax returns prior to 2019, or line 34900 of your Income Tax and Benefit returns from 2019 onward, to determine whether you have claimed donations for each of the past five years.

How can I get a list of my charitable donations?

Each charitable institution will send you a tax donation receipt for your total donations for the tax year, prior to the income tax due date.

Keep copies of your tax receipts, because they’re not sent to the CRA on your behalf. And since charitable donations are one of the biggest reasons for post-assessments, you may need them for proof in the future.

If you make donations through your employer or pension, you will need to check your income tax slips; T4, T4A, T3, T5013 slips; or partnership financial statements.