Basic Donation Tax Rules
Make the Most of Available Tax Benefits
Canada’s tax system provides incentives to encourage Canadians to donate to charities. The Federal Budget 2010 also made substantial changes to the Disbursement Quota making it less complex for charities to accept donations that can support both short and long term needs.
You can add value to your philanthropic clients with financial planning services that include charitable giving.
How to make the most of available tax benefits
- Combine two or more years of charitable donations into one year.
- Combine donations and/or claim them on the higher income spouse’s return.
- The maximum amount of donations that can be claimed in a year is 75% of the net income. If donations have exceeded the limit, the credit can be carried forward 5 years.
- Consider charitable gifts in wills. The limit for donations in the year of death is 100% of net income, and any excess can be carried back to the prior year’s income.
- All (cash) donations above $200 for the year give the donor a 29% federal tax credit plus a provincial tax credit worth 45% on average. Total tax credits vary by province, with special rules in Quebec.
- Whenever possible, donate publicly traded securities-in-kind; in most cases the capital gains will not be taxable, and can provide a considerably higher benefit than a cash gift.