According to Statistics Canada, compassion and values are the primary drivers of why Canadians collectively donate several billions of dollars to charity every year. In addition to helping out a great cause, Canada also has a generous tax credit system when it comes to charitable donations– allowing you to claim your charitable tax credits when filing your income tax return.
The Charitable Donations Tax Credit is available for anyone who makes a donation to a qualified organization. A donation is defined as a gift for which no consideration is given in return. A donee is defined as a charity or nonprofit organization that is registered with the Canadian Revenue Agency. The CRA provides a searchable online database, to determine the registration status of a charity, and its eligibility to issue an official donation receipt. While the donee is legally required to issue a donation receipt, it is your responsibility to ensure you obtain a copy, which will be required at the time of filing.
Donations and gifts are non-refundable tax credits, meaning you must claim your other credits first. If that amount is sufficient to bring your tax payable to zero, you will not be able to use your charitable donations to create or increase your tax refund. The amount you can deduct in a given year is subject to limits, but you can carry forward some of those unused deductions, again subject to eligibility. To claim your credit, report it on your federal and provincial tax return. As a rule, at the federal level, your credit will be 15 percent of the first $200 of donations and 29 percent of your additional donations. The credit can reach under certain rules 33 percent if you are in the highest tax bracket. All provinces also have similar credits, which fluctuate between 4 percent and 24 percent.
When it comes to the tax benefits of charitable giving, it is important to plan carefully to ensure that you maximize your deduction and minimize your out-of-pocket costs. Our financial advisors can work with you to develop a philanthropic plan that ensures you are getting the most out of your generosity, all while making a meaningful impact.
If you are a physician and have more questions on charitable donations and what else you can submit to maximize your savings, give us a call at (905) 815-6559. We are happy to answer all your questions!
