Support your favourite charities and causes and reap the benefits too!
You can claim all of your 2015 donations plus any donations made in any of the previous five
years that have not been claimed already to an annual limit of 75% of your net income. The first $200 of donations are eligible for a tax credit calculated at 20.06% (federal and BC combined), and donations in excess of $200 are eligible for a tax credit calculated at 43.7% combined.
If you are married, consider claiming all of your donations on one spouse’s tax return. By claiming donations on only one spouse’s tax return, you avoid having the first $200 of donations subject to the reduced tax credit twice, saving you up to $47 of income tax.
If you are a first-time donor, the federal portion of the tax credit is enhanced by a further 25% for up to the first $1,000 of donations in the year. This “super credit” is only available in the year you make your first donation, so you may wish to consider accelerating next year’s donations into that first year to make sure you maximize the potential super credit. This super credit is also only available until 2017.
You don’t have to claim your donations made in 2015 in 2015. If, for example, you have other deductions sufficient to eliminate your taxes, then there is no benefit to claiming the donations in this year. Instead, carry forward your donations; they can still be claimed in any of the next five years.
You are required to attach the official charitable donation tax receipts to your tax return if you file a paper tax return. If you file your tax return electronically, retain your donation receipts because the Canada Revenue Agency (CRA) may ask for them later. Pledge slips, cancelled cheques, credit card slips, and other proofs of payment are not acceptable proxies for an official donation receipt. However, these documents may be requested by the CRA if your tax return is selected for review. If you have lost your official donation receipt, contact the charity for an official duplicate. Donations to foreign charities generally do not qualify for the charitable donations credit, but there are special rules to allow credits for donations to some US charities and certain other prescribed foreign charities.
Every receipt from a Canadian charity or athletic association must contain a statement that it is an “official receipt” for income tax purposes. The receipt must also conform to the prescribed format, and include the name of the organization, its address, the registration number assigned to it by the Minister of National Revenue, the date, and the amount of the donation.
Note that the Canada Revenue Agency administratively allows a taxpayer to initially choose which spouse or common-law partner will report a donation or gift and allows for the subsequent transfer of any carry forward balances from one spouse to the other spouse.
Consult one of our knowledgeable Chartered Professional Accountants to maximize your donation tax credit.
For more really useful tax tips, visit https://www.bccpa.ca/CpaBc/media/CPABC/News_Events_Publications/Publications/TaxTipsandRRSP/Tax-Tips-2015.pdf .