Melanie’s Advice: Make the Most out of Your Charitable Donations

Canadians mostly donate to charities out of compassion for those in need — or at least that’s what we said when asked about our top reasons for giving in a recent Statistics Canada survey.

But those who are less motivated by such noble feelings might be enticed to give by the promise of a tax break. The federal government offers a number of tax incentives for generous Canadians who open their wallets for charity.

People donate to charities because they want to have a sense that their money is going to a purpose they personally believe in, said Adrienne Woodyard, a partner at law firm Davis LLP in Toronto.

“Everyone knows that tax dollars are used to fund a broad range of social programs, but charitable giving allows people to have a much greater degree of control over how their money is used and enables them to leave a legacy behind that may have profound benefits for future generations,” she told CBC News.

Here are some things you should know about making charitable donations in Canada.

Give generously

To claim charitable donations, you need to have official receipts that show the charity’s Canada Revenue Agency registration number. The most you’re able to claim in a year is 75 per cent of your net income. In the year of a person’s death and one year prior, the limit for donations is 100 per cent of the deceased’s net income.

Combine multi-year donations

If you donate small amounts in the year, you might consider combining two or more years’ worth (up to a maximum of five years) of donations to push you over the $200 threshold to take advantage of the higher tax credit.

Once over the $200 level, accounting firm KPMG recommends in its 2015 tax planning guide making that extra contribution in December rather than early in the new year in order to not have to wait until the following taxation year to claim the credits.

Share with your spouse

If you and your spouse donate separately, think about combining your donation receipts and claiming them on one return so that you’ll get the low credit rate on $200 once instead of twice.

‘Some people, if they have certain types of assets then they are making the decision to either gift them to someone, donate them or sell them.’– Adrienne Woodyard, tax lawyer

The higher-income spouse should claim all the donations since the credit reduces federal and provincial high-income surtaxes.

The CRA also lets a donation made by one partner to be split between both in any proportion. Partners are also able to put each other’s unclaimed charitable donations from previous years toward their returns.

Choose wisely

So, the tax incentives have convinced you, now it’s time to choose your charity.

The government lets you claim tax credits for donations to CRA-registered charities, as well as other “qualified donees,” including more than 480 U.S. universities, amateur athletic associations, government bodies and more.

Check out the agency’s Charities Listing, which provides annual information on organizations’ finances, activities and operations.

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