Whether you’re volunteering at your church, participating in a local walkathon, or donating to a charitable organization, we Canadians live in a society full of generosity. Along with the colossal feeling of knowing you’ve made a difference; your donation can also yield a tax break. Donating to a charitable organization is helps lower your taxes payable!
- First things first– This tax credit helps to lower your taxes payable… however, this is a non-refundable tax credit. As such, it can only be used to reduce tax owed; if you don’t owe any tax, you don’t get a refund from this credit. Generally, your tax savings will be equal to the amount of the charitable tax credit calculated.
- Balance Owing – If you know you’re going to owe money to the government, why not donate some of that money to a qualified charity, rather than the government? This will not only lower your taxes payable, but you’ll be supporting a charity in need.
- Qualified Charities – It’s important to know if you’ve donated to a qualified charity. As an example, unfortunately GoFundMe donations are considered a “personal gift” and not a donation. (This doesn’t mean you can’t donate to these campaigns, it’s just not tax deductible). It is extremely important to ensure the charitable organization you are contributing to is a registered charity and has an eligible charitable registration number.
- Tax Credit Rates – You can’t always claim the full value of gifts given to charities. Instead, you are limited to claiming gifts up to 75 percent of your net income in most cases. If you donate $200 or more, you qualify for a higher rate. This means that you are eligible for a tax credit worth15 percent on the first $200 donated, plus a tax credit worth 29 percent on any amount above $200. For example, if you donate $200, you receive a tax credit worth $30 (15 percent of $200). However, if you donate $500, you receive the same $30 tax credit, plus a tax credit worth $87 on the amount above $200.
- Timeline– You can claim donations made on or before Dec 31 in the same tax year. You can also claim any donation amounts not claimed by you or your spouse or common-lay partner in the past five years. This being said, you can also carry forward donation receipts for up to five years and claim them all at once in a single tax year. If you are claiming several credits this year, such as tuition and education credits, check to see if your donation would be better claimed in a future year. Remember, donation credits are non-refundable which means that if you are already in a position where you don’t owe any tax, you won’t benefit from claiming the credit.
- Super Credit – The super credit started in the 2013 tax year and is listed as only temporary for the 2013 to 2017 tax years. This credit results in an additional 25 percent to the federal rates. For the first $200, you receive the old 15 percent plus another 25 percent worth of credit. For amounts over $200, the amount would be the 29 percent plus another 25 percent federal credit. The maximum contribution that qualifies for the super credit is $1,000. Any amount over that $1,000 does not receive the additional credit. This credit is only considered to first-time donors. To be considered a first-time donor, you, or a spouse or your common-law partner, must not have claimed the charitable donations tax credit in the past five years.
- The super credit is only beneficial to individuals who are behind in taxes and if you have carry forward amounts owing. If you are one of these individuals it is most beneficial to apply all donations on your 2017 return!
And that’s my tips in 6!
If you have any questions in regards to the Donation non-refundable tax credit, reach out to us today! Happy to Help!