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Did you know that nearly a quarter of Canadians donated to charity because of the tax credit? As much as you believe in a movement, care about your community, and fight for those in need, you’re still reading this article about saving on taxes — which is absolutely okay. This guide will summarize what you need to know to capitalize on charitable donations in Canada.
- You can only claim credits from donations to organizations the CRA allows.
- The most you can claim is 75% of your net income for the year. Excess can carry to next year.
- Donating up to $200 yields a 15% tax credit. Donate even more and it’s 29% — or 33% if you’re in the top income bracket (over $235,675).
What are charitable tax credits?
In general, a tax credit subtracts some of the taxes you owe the government. Specifically for charitable tax credits, if you donate $300, then 29% of it ($87) can be deducted from the taxes you owe. If you owe $8,000 in taxes, the tax credits will reduce that to $7,913. Notably, this only applies to taxes you owe; if you owe nothing and yet have non-refundable tax credits left over, you can’t withdraw them as free money.
Who can get tax credits for charitable donations?
Any Canadian taxpayer.
Can you donate to any charity and get a tax credit?
No, but there is an expansive list of charities and other associations you can donate to, as recognized by the Canada Revenue Agency (CRA). This includes registered charities, amateur athletic associations, national art services, housing for the elderly, and the Canadian government itself. Every eligible charity can be confirmed on the CRA website. In contrast, non-registered non-profits cannot issue donation receipts.
What counts as a charitable donation?
Gifts can come in variable shapes and sizes. You can donate money, stocks, property, or anything else you own. Be careful to note its value and have some way to prove it, such as a receipt. Non-cash properties must be over $500.
For tax purposes, a donation can’t be an exchange. If you receive something in return for your donation, that value must be subtracted. To illustrate, if you donate $1,000 and receive honors in the form of a $200 watch, then you can only claim an $800 donation for tax purposes.
How do I claim the charitable tax credit?
Fill out the Schedule 9 form while doing your annual taxes.
First, you’ll need official receipts of your donation. All legitimate registered charities will mail out tax receipts before income tax is due; these receipts are the only acceptable submissions. The receipts are usually sent within a month of your donation.
If you get an accountant with expertise in deducting donations, you can send you receipts to them, then sit back and relax.
Here’s what every single official donation receipt must contain:
- The name and address of the organization recognized by the CRA.
- The organization’s registration number.
- A statement that the receipt is for income tax purposes.
- The receipt’s serial number.
- The location and time of the receipt’s issuing.
- The time the donation was received.
- The donation amount and the eligible tax credits.
- The donor’s address and full name, including middle initial.
- A description and value of any thanks the donor received.
- A signature from someone authorized to acknowledge donations.
- The CRA’s website.
Should I keep donation records? For how long?
Absolutely. Keep other documents that support your claim — like bank statements, cheques, and pledge forms. The CRA is especially careful to verify charitable donations, so be prepared.
In general, keep financial records for 6 years at least. There’s no harm in storing them for longer.
If you submit your taxes online, you don’t have to submit documentation unless the CRA responds with a request for them. In that case, you’ll be glad you kept records. If you file your taxes on paper, you do have to submit receipts and documentation along with them. Importantly, make copies and store those yourself.
The next part of this charitable tax credits guide will explain some beginner-friendly strategies to get the most tax savings from your donations, even without spending a ton.
