Charitable Donations

January 2, 2019

With the holidays and gift giving on our minds, making charitable donations can be a very satisfying way of sharing what you have with deserving causes and those less fortunate. But did you know that, donating can also provide tax advantages for you or your family, in estate plans or while you are still living.

The Charitable Donation Tax Credit

The Federal and Provincial government have a number of policies in place to provide tax advantages because they feel it’s good social policy for those willing and able to make charitable donations. There are two levels and a maximum donation amount allowed in a particular tax year. Here’s how it works:

  • The first $200 of eligible donations will reduce tax payable at a rate of 15% of the donation amount.
  • Any amount donated over the first $200 per year reduces the tax payable at a rate of 29%. The amount of credits claimed can generally not exceed 75% of net income in the year the credit is being claimed.

Donations can be spread out for up to five years and credits cannot be carried forward. For first time donors, the 2013 Federal Budget included an Enhanced Federal Tax Credit or those (or their spouses), who have not made a claim subsequent to the 2007 tax year.

Making a Donation

There are different ways to make charitable donations which will have different tax and or financial effects. For example, you can:

  • Donate to an eligible charity or to the government
  • Donate cash, life insurance or property
  • Donate securities (such as stocks or bonds) and you can receive a tax credit for the fair market value of the donation and you do not have to pay capital gains tax on any increase in value

It’s important to always donate with confidence. To help ensure the intended recipients of your donation will actually benefit, it is recommended to perform research on a charity that is personal and dear to you. Here is the CRA Charities Listing that may assist you in deciding where to make your donations. [link to: https://www.canada.ca/en/revenue-agency/services/charities-giving/charities-listings.html] that helps you ensure you’re donating to a legitimate charity.