T’is the season for giving and giving back, and that means many of us are starting to make charitable donations in the spirit of the holidays.
But did you know that you can get some of the money you donate over the holidays back on your tax returns next year?
Here’s what you need to know about charitable giving and income tax returns so every time you give over the holidays, you can get a little back!
How does charitable giving affect my tax returns?
When you donate to a qualified donee, you are eligible for a Charitable Donation Tax Credit on your tax return for that year.
This means that you get a certain percentage of your donation applied as a credit towards your owed taxes. If you don’t owe anything on that year’s returns, your credit can be carried forward for up to five years.
These credits are also shareable between spouses, meaning you can decide with your spouse who should claim credits based on who will get the best value from the donation.
How do I know if my donation qualifies for a Charitable Donation Tax Credit?
Donations that qualify for a Charitable Donation Tax Credit are any donations that are:
- made to a qualified donee AND
- made without receiving anything in return (e.g. tickets to an event, entries into a draw, etc.)
The most common qualified donees include:
- registered charities
- registered Canadian amateur athletic associations
- registered journalism organizations
- registered Canadian municipalities
- provincial and federal government agencies
- the United Nations and its agencies
There are other types of organizations that have qualified donee status. You can view this full list on the Government of Canada website.
How much will my Charitable Donation Tax Credit be?
The amount you will receive as a Charitable Donation Tax Credit will depend on a number of factors including:
- The province you live in
- The amount you donated to qualified donees
- Your net income in the year of your donations
Here is a breakdown to give you an idea of how to calculate your credit amount in British Columbia
| Net income less than $216,000 | Net income greater than $216,000 | |
|---|---|---|
| Donation amount less than $200 | Federal credit = 15% | Federal credit = 15% |
| Provincial credit = 5.06% | Provincial credit = 5.06% | |
| Total credit = 20.06% | Total credit = 20.06% | |
| Credit amount on a $100 donation = $20.06 | Credit amount on a $100 donation = $20.06 | |
| Donation amount more than $200 | Federal credit = 44% | Federal credit = 48% |
| Provincial credit = 21.86% | Provincial credit = 25.56% | |
| Total credit = 40.65% | Total credit = 46.12% | |
| Credit amount on a $1,000 donation = $406.50 | Credit amount on a $1,000 donation = $461.20 |
How do I claim my Charitable Donation Tax Credit?
To claim your donations on your tax returns, all you need is the donation slips you received from the organization you donated to. Most organizations will either issue a donation slip at the time of the donation or will send them out to donors in batches each month, quarter or year.
Simply use the information on your donation slip to claim your credit on your T1 form.
Be sure to hang on to your donation slips for future reference, as it is common for the CRA to automatically review returns on which donation credits are claimed. If your tax returns are reviewed by the CRA, refer to our resource on how to handle CRA tax return reviews.
Taxes starting to get complicated? Don’t be afraid to ask for help!
The more claims you add to your tax returns, the more complicated it becomes to file them. If the thought of adding to your returns is overwhelming enough to stop you from taking advantage of claims and credits, it’s probably time to call for backup.
Our RHN personal tax experts help many individuals navigate tax season every year, saving them time, money and stress. If you’re interested in getting some tax help, contact us any time to discuss whether we might be a good fit for you.
This post has been prepared for general information purposes. It is not advice. The information presented may not fit your unique situation, please consult one of our trusted business advisors at RHN CPA for further clarification and interpretation of your circumstances.