Donations to registered charities are one way the Canadian government allows taxpayers to reduce the amount of tax they owe. There are certain things you can do to get the full benefit of this deduction. Consider the following:
- You receive a 15% federal tax credit on the first $200 of qualifying charitable donations and a 29% credit on amounts over $200. Therefore the larger the total donations you are claiming the larger the credit. Consider keeping up to 5 years worth of donation receipts and claiming them all in one tax year.
- Only donations made to registered charities and supported by an official receipt qualify for the credit. Make sure your chosen charity is a Canadian Registered Charity and has a registered charity identification number on the receipt.
- Only donations in which you receive nothing in return are considered true gifts and therefore qualify for the credit. Tickets to a charity supper do not qualify for the credit however any cash donation you made and received an authorized receipt for would qualify.
- Donations may be claimed by either spouse or common-law partner regardless of which spouse made the donation. It’s usually best to claim all the donations on the higher taxpayers return.
Donations can only be used to reduce your tax owing to zero. They can’t be used to obtain a refund. Any unused amount, however, can be carried forward up to five years before they are lost. While donations are wonderful for the charity and beneficial for you the taxpayer it pays to know exactly how it works. Talk to your tax preparer soon and plan you strategy.
