Canada’s Gift Tax Law

Giving, a morally rewarding experience, also can be financially rewarding. By donating cash and other gifts to an eligible charity or organization, you can reduce your tax liability. As advantageous as these credits can be, Sidney Shultz of Shultz & Associates, a business and financial services company, has seen these tax credits “underutilized” in his practice.

What Makes a Gift

According to the Canada Revenue Agency, the types of gifts that are eligible for tax credit are cash, art, antiques, jewelry, stamps, coins and valuable books. Securities, like stocks and bonds, also qualify as gifts. If you donate a piece of ecologically sensitive land or certified cultural property, that qualifies as a gift as well.

You cannot, however, donate your time or services and have that qualify as a taxable gift.

Qualified Charities

You may donate gifts to various entities. Registered charities, registered amateur athletic associations, national arts service organizations and the government are examples of eligible organizations. A registered charity or association is one that is eligible to issue donation receipts.

Shultz explains that when donating to a charity, donors should verify that “it is in good standing.” “It must be a legitimate tax body,” he explains. It’s a good idea to research the charity and ensure that it is honest, but also, that it is not under a revoked or suspended status by the CRA.

Tax Benefits

Depending on your situation, the benefit you receive from your donations may be large or small. Although this is a nonrefundable tax credit — meaning that it cannot make you go from owing money on your taxes to receiving a refund — it can reduce the amount of taxes you owe. On your first $200 of donations, you receive 15 percent of that amount as a nonrefundable federal tax credit.

Anything after $200, you would receive 29 percent of the amount.

For instance, say you donate $900 to your favorite registered charity. Your tax credit would be $233.   ($200 X 15 percent) + ($700 X 29 percent) = $30 + $203 = $233

You also receive additional provincial tax credit, depending on where you live. If you would have owed $200 in taxes, this credit reduces the amount of taxes you owe to $0.

Eligible Amounts

An important factor to consider when filing your return is the eligible amount of your gift, or the amount you are allowed to say your gift is worth. To calculate this, you take the value of the gift you donated minus any advantage you received from making the donation. An advantage may include free admission to a venue or free tickets an event.

Say that you donate $10,000 to the a registered amateur athletic association and to thank you for doing so, they give you front row seats to the Stanley Cup finals that are worth $1,000. You would have to subtract that $1,000 from the $10,000 you donated and the amount of your gift would be $9,000.

If you donate property, like a stamp collection, the fair market value of the property is used to determine your gift amount. The fair market value is the highest going rate for the item, notes the CRA.

Documents and Deadlines

When you make a donation, it is wise to hold onto your donation receipt. The CRA requires that you have a donation receipt to claim the tax credit. If you file a paper return, you’ll have to turn in your donation receipts. If you file electronically, the CRA may or may not request your receipts.

Shultz explains the “donation must be in the tax period,” as opposed to “after the fact, after the date has expired.” If you make a donation a few days before you file your return, you may have to claim it on next year’s return.

First-time Donor’s Super Credit (FDSC)

References & Resources

• Sidney Schultz; Schultz & Associates; Vancover, Canada
• Canada Revenue Agency: Gifts and Income Tax
• Canada Revenue Agency: Giving to Charity