Taxes

How to Deduct Charitable Donations in Canada

Marin Perez

If you made a charitable donation last year, you may be eligible to claim the Charitable donation tax credit. Doing so can help you save money on your next income tax return. Keep reading to learn more about what you can claim, along with applicable charitable tax credit rates.

Which donations are eligible for tax deductions?

You need an official donation receipt for it to be eligible for a tax deduction. Only Canadian registered charities and other qualified donees may issue official receipts.  Although qualified donees have the ability to issue receipts, that doesn't mean they automatically will! If you are planning to claim the Charitable donation tax credit on your next income tax return, make sure to get a receipt.  You don't need to submit your receipts along with your income tax return, but do keep them in a safe place for five years in case the CRA asks to see them.  Once all your receipts are together, you will need to figure out which donations you'd like to claim. In a single year, you can claim:

     
  • Any donations made on or before December 31 of the applicable tax year
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  • Any unclaimed donations you made in the last five years
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  • Any unclaimed donations made by your spouse or common-law partner in the last five years.

What donations are eligible for the charitable tax credit?

The types of donations that are eligible for the charitable tax credit generally include:

     
  • Gifts of money
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  • Securities
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  • Ecologically sensitive land
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  • Certified cultural property
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  • Personal-use property (i.e., paintings, sculptures, jewellery, stamps and coins)
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  • Inventory (i.e., antiques, art and rare books).

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What donations are not eligible for the charitable tax credit?

Examples of donations that are not usually eligible for charitable tax credits include:

     
  • Free services such as skills and/or time
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  • Admission fees for an event or program (i.e., daycare or nursery school fees)
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  • Amounts paid to purchase a lottery ticket or contest entry fees, even if proceeds from such tickets or entry fees go to benefit one or more charities
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  • Tuition fees (certain exceptions apply)
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  • Gift certificates (certain exceptions apply)
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  • Pledges.

The CRA limits the eligible donations to 75 percent of your net income. That being said, for gifts of cultural property or ecologically sensitive land, you may claim up to 100 percent of your net income.

How to calculate charitable tax credits?

To know how much you will be able to claim, you will need to figure out your charitable tax credit rate. Two tax credit rates will apply¬†one at the federal level, and one at the provincial level. Eligible amounts above $200 are credited at a higher rate. First-time donors are also eligible for a super credit.  Here is an example of how to apply the charitable tax credit table:  Let's say you live in Ontario and donated $400 to an eligible charity in 2017. Federally, the first $200 would qualify for a 15 percent credit ($200 x 15 percent = $30), and the remaining $200 would qualify for a 29 percent credit ($200 x 29 percent = $58).  Provincially, the first $200 would qualify for a 5.05 percent credit ($200 x 5.05 percent = $10.10) and the remaining $200 would qualify for a 11.16 percent credit ($200 x 11.16 percent = $23.20).  This means that in 2019, you would be able to claim $121.30 on a $400 donation in the province of Ontario.

How the tax credit works

The Charitable donation tax credit is a non-refundable credit. This means the credit can only be used to reduce income tax owed, and will not help you get a bigger tax refund.  However, there are exceptions to this rule. Residents of Quebec who qualify for a refundable federal tax abatement may incur a federal tax rebate as a result of the Charitable donation tax credit.  In addition, if you are required to pay provincial income surtax, you will technically save more than the charitable donation credit, since your donation will also reduce your base income and a provincial surtax for the year. Finally, you can reduce your capital gains tax f you donated publicly traded securities.¬†This will save you additional money.