Charitable Donations Tax Credit

We prepare income taxes for clients and a lot of people are not aware that charitable donations should all be claimed by one spouse. The other thing that we find is that people are not aware of what sort of income tax benefits they receive when they make an eligible charitable donation.

There is a charitable donations tax credit and the government gives you 16% on the first $200 of donations that an individual makes and 29% on any donations there after.

You can claim mounts up to 75% of your net income unless you are giving a gift of certified cultural property or ecologically sensitively and then depending on the circumstances you may be able to claim up to you 100% of your net income

For the most part when clients come in a typical family might give $100 to the Canadian cancer society $50 to the MS association and $100 to the heart and stroke foundation. Let’s use that as an example to determine how much a family would receive an income tax credits.

So on the first $200 it is a 16% credit which equals $32 of benefit

On the next $50 it is a 29% credit which equals $14.50 of benefit

Also the government announced a first-time donors super credit so for any charitable donations made after March 20, 2013 then first-time donors may receive an additional tax credit of 25% on the first $1000 of monitory donations that they make above the amount indicated above.

Another item that some people do not know is that in one year you may claim donations made from January to December 31 of the applicable tax year. You can also claim any unclaimed donations made in the previous five years made by yourself or made by your spouse or common-law partner.

There is no advantage to a higher income earning spouse claim in the credit or a lower income earnings both claim in the credit the key is to pick one spouse and have them clean the entire donation amounts made by the family.

The key is to ensure that you’re only claiming donations where you have received the charitable gift receipt by a registered charity.

It does not happen often but I have had a few clients audited for their donation receipts so be sure to keep these on file for seven years in the case of an audit.

The most common mistake that people make is they don’t keep track of all their charitable donations in the current year.  At tax time, they can’t locate their receipts (perhaps missing a few) to be able to maximize their credit.  It is best to start a folder or tax envelope, and keep all of your income tax related documents together.  This habit will make it easy to do your return and also enable you to receive the best benefit from your generous gifts.

Check out the tax calculator from CRA website

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