Live Well, Do Good

Get a Break on Your Taxes Through Charitable Donations

Brandon Sun, December 31, 2006 - David McConkey

According to a recent Statistics Canada survey, almost everyone gives to a non-profit program or group during the year. These donations include money, food, clothing, and other household items. They contribute greatly to the sustainability of many important community efforts.

Some donations can be used for income tax credit. Here are some tips on getting the most of your donations at income tax time:

Receipts:  Contributions can be made to many worthwhile non-profit organizations, but only donations to registered charities qualify for income tax credits. And although they are often called “tax deductible receipts,” they actually qualify for a tax credit, not a deduction.

The receipt should have the charity’s name and registration number, date, serial number, amount donated, donor’s name and be signed on behalf of the organization.

A new requirement is that receipts note the address of the Canada Revenue Agency’s website Anyone can look up information on this website about charities in general, or any specific registered charity.  

Don’t forget to claim donations made through your workplace; these are recorded in Box 46 of the T4 slip from your employer.
Note that payments for raffles, dinners, and other events are usually not eligible for an income tax receipt. In the case of a payment for a dinner or similar event, only the amount over and above the cost of the dinner itself qualifies for the receipt.

Also note that donations to political parties do not qualify here. They actually qualify for even more generous tax credits; save those receipts separately.

Those filing a paper income tax return include their receipts. If you file electronically, save your receipts in case you are asked for them later.

Tax Credits:  In order to encourage donations, the federal and provincial governments provide a two-tiered credit system. Add up all your donations. The amount up to $200 qualifies for a tax credit at the lowest tax rate. The amount over $200 qualifies for a credit at the highest tax rate.

When the federal and provincial programs are combined, Manitoba taxpayers reduce their taxes by about 25% of the total donated up to $200. For the amount over $200, the saving is about 45%.

Taxpayers can get a tax credit for donations up to 75% of their net income. In the year of death (and going back one year), the limit is 100%.

Donations may be carried forward for up to five years. This should be considered to take advantage of the higher credit over $200. Also, donations made in years of low income (when no taxes would be paid anyway) should be carried forward to a higher income year.

Donations made by one spouse / common-law partner can be claimed by either one. To maximize the credit, donations can be lumped together. It doesn’t matter by which person, as long as they pay taxes.   

One-quarter of Canadian tax filers claim an income tax credit for donations made during the year. In fact, Manitobans have the highest rate in Canada, at 28%. The actual number of donors, however, would be even higher as some donors would be carrying forward their donations, or including their donation with their spouse / partner.  
Special Cases:  There are special rules for donating property (as opposed to money), donations of cultural and ecological gifts, and for artists who donate from their inventories.

The new Conservative federal government is encouraging donations of publicly traded securities (stocks) that have appreciated in value. For donations made on or after May 2, 2006, the donor does not have to pay the capital gains tax on such gifts. This measure is expected to generate millions of dollars every year for Canadian charities.

Consider donating to charities. Make an investment in feeling good about yourself, your community, and your income tax!

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See also:

Charitable Donations:  Top Ten Canadian Tax Tips

Political Contributions: Top Ten Canadian Tax Tips 

Live Well, Do Good 

Tax Time Offers Folks a Chance to Reflect

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