I was asked last week to write a tax tip about the TAX SAVING of CHARITABLE CONTRIBUTIONS on a PERSONAL TAX return. Obviously, when a person contributes to a charity, it is the joy of giving that occupies him. However, there is definitely a favourable tax implication to donating and a few ways to maximize the benefit. Here is a good summary:

1. Donation is a nonrefundable TAX CREDIT. This means that it will reduce your taxes, to the extent you paid/owed them. It won’t refund taxes beyond the taxes calculated as payable before the donation. In other words, if you have no income and no tax to pay and you made a charitable contribution, you will receive no refund.

2. There is a federal and a provincial tax credit. There is a link below to the rates. On a federal level the credit is 15% on the first $200 and 29% on the amount above the first $200. From 2016, it is 33% instead of 29% to individuals with income above $200,000. Provincial calculation works in a very similar way. ON rates for example are 5.05% on the first $200 of donation and 11.16% for donations over the first $200.
 

3. LIMITS – donations are limited to 75% of person’s net income.
 

4.  If you don’t have enough tax payable to utilize the donation, it can be carried forward for up to 5 years. It can also be utilized by any of the spouses.

5. Donation can be combined between spouses and claimed by one spouse to utilize higher credit % above the first $200.

Rates:

https://www.canada.ca/en/revenue-agency/services/charities-giving/giving-charity-information-donors/claiming-charitable-tax-credits/charitable-donation-tax-credit-rates.html   

Calculator:

https://www.cra-arc.gc.ca/chrts-gvng/dnrs/svngs/clmng1b2-eng.html