Donations are the blood line for many organizations. It keeps people employed, it covers the organization’s administrative expenses, and yes, it also helps those in need. As for yourself, you get the intrinsic satisfaction of doing good for society extrinsically you get tax credits!
Before we get into the nitty gritty let’s talk about donations from a macro level. Generally, for the first $200 you donate, you will receive a federal tax credit of 15%. For donations over $200, the federal tax credit rate increases to 29%. On top of the federal tax credit, you may also be eligible for a provincial tax credit, depending on where you live.
Note: a donation doesn’t have to be monetary. A donation can also be in the form of tangible or intangible assets. For example, if you decide to gift your car or stock portfolio you will receive a donation slip of the assets current fair market value. It’s great to embody the spirit of Robin Hood or Santa Claus but you can only claim part or all the eligible amount of your gifts, up to the limit of 75% of your net income for the year, and 100% of your income in Quebec. After the 75% threshold the tax benefits stop. The good news is that a donation to an eligible charity can carried forward for up to 5 years. A donation of ecologically sensitive land can be carried forward for up to 10 years. The CRA has made donating even easier for Canadian residents and non-residents by allowing you to claim a portion of a donation in one year, and the unused portion in another year. By the way; the entire donation can only be claimed once. A general rule of thumb; speak with your accountant before making a significant donation. Another distinction which is very important always know the difference between a not for profit and charity. A not for profit does not and cannot hand out donation slips for tax credits, whereas a charity can provide donation slips. Some bad characters act as charities and hand out fake donation slips. The only reliable source to verify whether a charity is valid and active is on the CRA (Canada Revenue Agency) website. A link has been provided below. People do get scammed, and we don’t want you to be one of them.
A link has been provided below. People do get scammed, and we don’t want you to be one of them. https://www.canada.ca/en/revenue-agency/services/charities-giving/list-charities/list-charities-other-qualified-donees.html
Tax tip to keep in mind
The CRA allows you and your spouse to combine your donations made in a given tax year and the previous five years to the extent you have unclaimed donations for the purposes of the donation tax credit. This enables you and your family to maximize your donation tax credit. If both you and your spouse have made separate donations, considering pooling them and reporting them on the tax return of the spouse who will benefit the most from them. This will generally be the higher income spouse.
Manu Shandal CPA, CPA(US)