Donating to registered charities and gifting to non-profit organizations Tax Credits

Why donate?

Canadians donate to charities for multiple reasons, by donating you not only make a positive impact but also benefit from tax advantages. Charitable donations can result in significant tax deductions, reducing overall tax liability. By supporting causes aligned with your values, you can simultaneously make a difference and enjoy financial incentives, fostering a culture of giving that benefits both individuals and the broader community.

Tax credits

Donating to a registered charity that provides you with a donation tax receipts, will provide you with both a federal and a provincial tax credit, which will in turn, reduce your overall taxes.

Federally, on the first $200 of donation, you will receive a 15% tax credit, on the amounts over $200, you will receive a 29% tax credit. If you are in the highest tax bracket, you will receive 33% tax credit.

Ontario, on the first $200 of donation, you will receive a 5.05% tax credit, on the amounts over $200, you will receive an11.16% tax credit.

As an example, a $1,000 donation, will provide you with a tax credit of $361.38 in both federal and Ontario credits.

Corporate donations

Donations can be either made individually or through a corporation. A corporation is entitled to a tax deduction for the donation amount against their income. As the corporation reduces its income, it also reduces its tax liability.

Donating personally or through a corporation

To determine whether it is more beneficial to donate personally or through a corporation, keep in mind that donating through a corporation will provide you with a deduction against income, donating as a person, will entitle you to claim a tax credit, this tax credit will reduce your tax owing.

Comparison between donating as an individual and as a corporation

Tax Impact:

Personal donations: a non-refundable tax credit with the combined federal and provincial tax credit reduce the overall tax liability.

Corporate donations: a deduction is received. The dollar amount of the donation is an expense that reduces net taxable income.‍

Carry forward period:

Personal donation: 5 years

Corporate donation: 5 years

Limitations:

Personal donation: Generally, up to 75% of net income for tax purposes.

Corporate donation: Generally, up to 75% of net income for tax purposes.

Donating to non-profit organizations

As non-profit organizations are not allowed to issue donations tax receipts, there will be no benefit to donate as an individual, however, corporations can donate to non-profits by way of sponsorship and gifting as part of their advertising budget, which is an expense that reduces net taxable income.

What and when you can claim

You can claim eligible amounts to a limit of 75% of your net income. In any one year, you can claim:

·        Donations made by December 31 of the applicable year.

·        Any unclaimed donations made in the previous 5 years.

·        Any unclaimed donations made by your spouse or common law partner in the year or in the previous 5 years.

Online donations tax credit calculator

You can use this online calculator to check your charitable tax credit:

https://www.canadahelps.org/en/tax-time/

Disclaimer

Please note that the above information is intended as a general source of information and should not be considered as specific source of tax, legal or financial advice. Tax rules and regulations are subject to change at any time, and we at MMS Accounting & Bookkeeping will help you navigate and fully benefit from any tax savings available to you. Should you need help or require additional information, you may contact us for advice based on your situation.

Contact us

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