If you, your spouse, or your common-law partner made a charitable donation (a gift of money or property) to a qualified organization, you might be able to claim a non-refundable tax credit for your generosity.
When completing your return, you can claim the donations you made during the year, as well as any unclaimed donation amounts from the past 5 years. Why carry forward these amounts instead of claiming them in the year they’re made? The simple answer is that combining the donations from multiple years and claiming them all at once results in a much greater tax benefit than if you were to claim them annually. Best of all, you don’t need to do anything to carry forward your donation amounts; simply hang on to your receipts and include them with your tax return in the year you wish to claim the amount.
There is a limit, however, to the amount of donations that can be claimed in a given year. As of 2016, the donation amounts that you’re claiming can’t exceed 75% of your net income, with one exception: if you made gifts of certified cultural property or ecologically sensitive land, you might be able to claim a donation amount equal to 100% of your net income.
Did you know? If you’re a qualifying first time donor, you might be eligible to receive an extra federal tax credit of 25% on the first $1,000 of your monetary donations. For more information check out our article, First-time donor’s super credit (FDSC).
Important: If you received something of value from the charity in exchange for your donation, this is considered an advantage. The value of any advantage you receive must be subtracted from the amount you donated, before claiming the charitable donation tax credit.
The charitable donation tax credit can only be used to reduce your income tax payable. Generally speaking, your tax savings will be equal the tax credit amount except if any of the following situations applies to you:
- If you’re a resident of Québec and you’re entitled to a refundable federal tax abatement, then your federal tax savings will be reduced.
- If you’re required to pay a provincial income surtax, then your tax savings will be more than the charitable donation tax credit (this is because the credit will reduce both your base income tax and your provincial surtax).
- If you made a donation of publicly traded securities (like stocks or bonds), you can increase your tax savings by reducing your capital gains tax.
In order to claim the charitable donation tax credit, you must have received an official receipt from the organization or institution you donated to. Or, if you donated to a charity through a company program, through your employer, or through the educational institution you attend, the donation amount must be shown on your T4, T3, T4A, T5013 or T2202A slip. Official receipts contain the following information:
- A serial number or a receipt number
- Date of issue
- Name, address, and registration number of the charity
- Date the donation was received
- Donor’s name and address
- Total amount received by the charity
- Fair market value/value of advantage (if applicable)
- The Canada Revenue Agency (CRA) web address and
- A signature by a duly authorized officer of the organization
Important: Charities are not required to issue an official receipt. Since you can’t claim the charitable donation tax credit without one, confirm with the charity beforehand if they’ll issue you an official receipt for your donation.
Where can I learn more?
- Canadian charity listings (CRA website)
- Schedule 9 and Schedule V: Tax credit for donations and gifts (H&R Block Online Help Centre article)