Charitable Donations Can Help You Save on Your Taxes

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A 2015 Statistics Canada report revealed that 82{cae2521f64dcff784c511b644c6cc8c98f9594c79acdd41ba953a724385391e5} of Canadians made financial donations totalling $12.8 billion to charitable or non-charitable organisations in 2013.   Giving where it counts makes a difference not just to those in need, but also for you come tax time.  The federal government offers tax benefits, like the Charitable Donation Tax Credit (CDTC), to those who make contributions to charities.

Canada’s Income Tax Act allows taxpayers to claim eligible donations up to 75{cae2521f64dcff784c511b644c6cc8c98f9594c79acdd41ba953a724385391e5} of their net income.  In the year of a taxpayer’s death and the year before, this amount rises to 100{cae2521f64dcff784c511b644c6cc8c98f9594c79acdd41ba953a724385391e5}.  Donations can be made in the form of cash, goods, lands or listed securities.  They can be made to any cause of your choice; however, the recipients must be registered Canadian charities or qualified donees as outlined by the Canada Revenue Agency (CRA).

The current charitable donation structure is two-tiered.  Donations claimed in a tax year qualify for a non-refundable federal tax credit of 15{cae2521f64dcff784c511b644c6cc8c98f9594c79acdd41ba953a724385391e5} on the first $200 and 29{cae2521f64dcff784c511b644c6cc8c98f9594c79acdd41ba953a724385391e5} for amounts exceeding $200. Each province also offers its own non-refundable tax credits.  Depending on where you live, you could reduce your taxes by approximately 20{cae2521f64dcff784c511b644c6cc8c98f9594c79acdd41ba953a724385391e5} with your first $200 in donations and about 44{cae2521f64dcff784c511b644c6cc8c98f9594c79acdd41ba953a724385391e5} with amounts beyond $200.

allows taxpayers to Taxpayers can claim up to 75{cae2521f64dcff784c511b644c6cc8c98f9594c79acdd41ba953a724385391e5} of their net income as tax donations.

Taxpayers can claim up to 75{cae2521f64dcff784c511b644c6cc8c98f9594c79acdd41ba953a724385391e5} of their net income as tax donations.

In 2016 the highest federal tax rate increased from 29{cae2521f64dcff784c511b644c6cc8c98f9594c79acdd41ba953a724385391e5} to 33{cae2521f64dcff784c511b644c6cc8c98f9594c79acdd41ba953a724385391e5}.  Under proposed new legislation, a portion of your donation over the first $200 could be eligible for a 33{cae2521f64dcff784c511b644c6cc8c98f9594c79acdd41ba953a724385391e5} federal tax if your taxable income is over $200,000.  Only donations made starting 2016 are eligible for the new rate.  If your taxable income is less than $200,000 the federal credit for donations over $200 remains at 29{cae2521f64dcff784c511b644c6cc8c98f9594c79acdd41ba953a724385391e5}.

Charitable contributions can take on many forms and are not limited to cash donations. The CRA also recognises gifts of certified cultural property, capital property, publicly traded securities and ecologically sensitive land to registered Canadian charities or qualified donees.  Under strict guidelines, donations to U.S. charities are even permissible.

In order to claim the CDTC non-refundable tax credit you must obtain an official donation receipt for each contribution you make. These receipts must disclose the charity’s registration number, donor’s name, date the gift was given and the CRA’s website among other things. The donations must be received by the charities on or before December 31 to be claimed in the same calendar year.

Canadian tax laws governing charitable donations are complex.  If you would like to learn more about the Charitable Donation Tax Credit, or other donation credits like the First-time Donor’s Super Credit (FDSC) that can help you and your family, contact GB Pilley & Associates Ltd., Chartered Professional Accountants at 604 926 3522.

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