Everything you need to know about how to claim charitable donations when filing a tax return!
Everyone is always asking how to claim charitable donations when filing a tax return. We’ve got the details!
To calculate your charitable tax credit, you must first determine the eligible amount of your charitable donations. The eligible amount of your charitable donation is the amount by which the fair market value of the donation exceeds the amount of any advantage received or receivable because of the donation; this is the amount that the qualified organization can issue a receipt for. For example, if you attended a charity basketball event and paid $1,000 for a ticket but the face value of the ticket was $200, you are considered to have received an advantage of $200 in purchasing the ticket and would only be eligible for a donation amount of $800 ($1,000 – $200).
You can claim eligible amounts of gifts to a limit of 75% of your net income; however, for gifts of certified cultural property or ecologically sensitive land, you may be able to claim up to 100% of your net income. It is important to note that if you have donated any stocks, bonds, or mutual funds to a registered charity, you are generally not liable to pay tax on the related accrued capital gains. Once you have determined your eligible amount you can take advantage of the federal and provincial tax credit for donations.
Federal charitable tax credit: you can claim the federal tax credit in two stages. Firstly, you can claim a 15% low rate credit on the first $200 of donations you make in a calendar year. Secondly, you can claim a 29% high rate credit on the amount of donations you make over and above your initial $200 worth of donations.
If your family has filed a charitable donations claim since 2007, you may be eligible for the one-time additional federal credit for first-time donors. The first-time donor credit is available on up to $1,000 of donations made after March 20, 2013 and before 2018. Consequently, 2017 is the last year for which this credit may be claimed.
Ontario charitable tax credit: you can claim the Ontario tax credit in two stages. Firstly, you can claim a 5.05% low rate credit on the first $200 of donations you make in a calendar year. Secondly, you can claim a 11.16% high rate credit on the amount of donations you make over and above your initial $200 worth of donations.
Sticking with the basketball ticket example, if that was the only donation your family made in the calendar year, you would claim 15% federally and 5.05% provincially on the first $200 of your $800 eligible amount and 29% federally and 11.16% provincially on the remaining $600 for a total credit of $281.06. For assistance in calculating your charitable tax credit, you can use the CRA’s charitable donation tax credit calculator by clicking here .
Qualified donees include:
- Registered charities: the CRA updates a List of Charities each business day so it is advised that you search the list to confirm if a Canadian charity is registered, revoked, annulled, penalized, or suspended to help guide your donation decisions. Further, the List of Charities will allow you to view the charities contact information, general activities, and financial information including the public portions of a charity’s annual information return. You can search the CRA’s List of Charities by clicking here.
- Registered Canadian amateur athletic associations
- Registered national arts service organizations
- Registered housing corporations resident in Canada set up only to provide low-cost housing for the aged
- Registered municipalities in Canada
- Registered municipal or public bodies performing a function of government in Canada
- The United Nations and its agencies
- Registered universities outside Canada that are prescribed to be universities, the student body of which ordinarily includes students from Canada
- Her Majesty in Right of Canada, a province, or territory
- Before June 23, 2015, registered foreign charitable organizations to which Her Majesty in Right of Canada has made a gift. For gifts made on or after June 23, 2015, registered foreign charities (which now include foreign charitable foundations) to which Her Majesty in Right of Canada has made a gift
As you have access to a higher tax credit if the amount of your donations are larger, it is advised that only one spouse or common law partner claim the entire family’s charitable donation amount. Further to that point, if your family has not donated an amount greater than $200 in the calendar year, you should consider accumulating your charitable donations over a couple of years to increase your potential tax credit when you claim charitable donations. That said, your family will only be able to accumulate five years of donations as the donation credit is only available for donations made within the five preceding years.
-Julian Franch, BA, MBA, JD
© Kalfa Law 2018
The above provides information of a general nature only. This does not constitute legal advice. All transactions or circumstances vary, and specified legal advice is required to meet your particular needs. If you have a legal question you should consult with a lawyer.