Charitable giving is an important aspect of Canadian society, with many individuals and corporations actively participating in supporting various causes and organizations. Not only does giving back to the community create a positive impact, but it also provides individuals with an opportunity to receive tax credits for their donations. In Canada, the government offers tax incentives to encourage and reward charitable giving, making it easier for Canadians to contribute to causes they care about.

One of the main benefits of charitable giving in Canada is the opportunity to receive tax credits. When individuals and corporations donate to registered charities, they can claim the donation amount as a tax credit on their annual income tax return. This means that a part of the donation is deducted from the donor’s taxable income, resulting in a lower tax liability.

Qualified donations for Tax Credit :

• Donations must be made to registered charities or other qualified donees which are recognized by the Canada Revenue Agency (CRA).
• It is important to ensure that the charity you are donating to is registered, because only donations made to registered charities are eligible for tax credits. The CRA website provides a searchable database where individuals and corporations can verify the registration status of a charity before donating.
• Donations made by December 31 of the applicable tax year;
• Any unclaimed donations made in the previous five years; and
• Any unclaimed donations made by your spouse or common-law partner in the year or the previous five years.

 Tax credits are calculated based on the eligible amount of the donation and the individual’s or corporation’s tax bracket.

The amount of tax credit that can be claimed varies depending on the amount you donate and the individual’s or corporation’s tax bracket. Individuals can claim up to 75% of their net income as a donation tax credit, while corporations can claim up to 75% of their taxable income. However, you can claim eligible amounts of gifts to a limit of 75% of your net income. For gifts of certified cultural property or ecologically sensitive land, you may be able to claim up to 100% of your net income.

In addition to the federal tax credit, many provinces and territories in Canada also offer additional tax incentives for charitable giving. These provincial tax credits can vary, with some provinces providing higher tax credits than others. It is important to consider both the federal and provincial tax incentives when calculating the total tax credit that can be claimed for charitable donations.

To claim the tax credit for charitable donations, individuals must keep receipts or other official documentation provided by the charity. These receipts should include the name and registration number of the charity, the date and amount of the donation, and a statement indicating that no goods or services were received in exchange for the donation. It is important to keep these receipts safe as they may be requested by the CRA during a tax audit.

The federal government provides a tax credit of 15% on the first $200 donated and 29% on any amount exceeding $200. This means that if an individual donates $300 to a registered charity, they would receive a tax credit of $15 for the first $200 and $29 for the remaining $100, resulting in a total tax credit of $44. It’s important to note that these figures are based on the federal tax credit rates and may differ slightly depending on the province or territory in which you reside.

The tax credit you claim on donations is non-refundable, as such, it can only be used to reduce tax owed; if you don’t owe any tax, you don’t get a refund. Generally, your tax savings will be equal to the amount of the charitable tax credit calculated. The following are exceptions:

• If you are a resident of Quebec and are entitled to a refundable federal tax abatement, then your actual federal tax savings will be reduced.
• If you are required to pay provincial income surtax, then your actual savings will be more than the charitable tax credit calculated as the credit will reduce both your base income taxes and provincial surtax.
• If you donate publicly traded securities, you may increase your tax savings by reducing your capital gains tax.

In conclusion, charitable giving in Canada not only helps support important causes but also provides individuals with significant tax advantages. By taking advantage of the charitable donation tax credit, Canadians can make a difference in their communities while also reducing their overall tax liability. Individuals need to keep track of their eligible donations and obtain official donation receipts to ensure they can claim the tax credits accurately.

And that’s it! Now that you’re aware of it, use this right away to relieve your tax burden! Remember to get in touch with EMCA   as well to receive expert advice for filing your taxes and receiving your returns.