Charitable donation is a non-refundable tax credit for the donations and gifts.
How is the charitable donation credit calculated?
Charitable donation is unusual in that it is calculated at two rates:
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- For the first $200 of donations, the credit is calculated at 15% (the lowest marginal tax rate).
- For the remainder, the credit is calculated at 29% (the highest marginal tax rate).
Limit of donations you can claim
Generally the maximum donations you can claim is 75% of your net income reported on line 236 on your tax return. The limit increases to 100% for the year a person dies and the year before that. For donations of appreciated capital property giving rise to capital gains, the limit is also 100%.
Unused donations can be carried forward
Charitable donation credit is a non-refundable tax credit; however, any unused credit can be carried forward for 5 years if you don’t have sufficient tax payable to absorb the credit.
It may be beneficial to defer claiming charitable donations
Claiming charitable donations in the year they are made is optional. It may be beneficial to accumulate the donations within the five-year carryforward period to take advantage the higher rate for amount in excess of $200. For example, you had donation of $200 for 2011 and $200 for 2012. You can claim $200 in 2011 and $200 in 2012. It will give you a credit of $30 (15% of $200) for 2011 and $30 for 2012 for a total of $60. However, if you claim the total amount of $400 in 2012, your credit will be $88 ($200 * 15% + ($400 – $200) * 29%). It is a $28 tax saving.
Which spouse should claim the charitable donation tax credit?
Although each spouse can choose to claim a portion of the donations, it is beneficial to combine all donations and claim it on one return. This can save tax when the total donations are more that $200.
Donation receipts
Remember to get an official receive showing either your or your spouse’s or common-law partner’s name when you make a donation. If you file a paper return, you need to attach the receipts with your tax return. If file electronically, keep the receipts in case the Canada Revenue Agency asks to see it.
How to claim charitable donation tax credit?
You need to complete Schedule 9 and claim the amount on line 349 on Schedule 1.