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Did you know that the average age of Canadian donors hovers around 55? And while people 24 and under are donating an average of $400 a year, those approaching retirement are giving away $3,300. While everyone should be commended for donating to charity, not everyone is in an equal position to make use of the tax credits.
The first part of this charitable tax credits guide explained the basics of charitable donations, the eligibility criteria, and how to capitalize on them legitimately.
This part of the guide will introduce you to beginner-friendly ways you can optimize your donations to get the highest tax deduction.
Claiming donations from past years
When you make a donation, you have up to 4 years to claim the tax credits. Plus, excess donations can be deferred to next year, within 5 years. This opens up a strategy that people use to get more tax credits.
Note that donating up to $200 yields a 15% tax credit and higher contributions yield 29%. If you have under $200 worth of donations this year, you can combine it with past or future years until the total surpasses $200.
The easiest way to keep track of your past donations — claimed and unclaimed — is to visit the CRA My Account website and log in. Look at the top of the page; you’ll see a tax returns tab. From there, you can look at your filings from prior years. If you’re looking into a year pre-2019, check your T1 form, specifically line 349. If it’s a filing from 2019 or later, check your Income and Tax Benefit returns, line 349000.
Claiming donations as a couple
If you have a spouse via marriage or common-law, you can pool your donations and claim the total. You can transfer a portion or the entirety of your donations to your partner. This opens up a strategy to gain more tax deductions for each person.
Imagine you donated $200. Your partner also donated $200. Well, 15% of $200 is $30. You’ll each save $30 on the tax you owe. That’s $60 in total savings.
Alternatively, you pool the donations and claim $400. The first $200 of it garners a 15% credit, which is $30. The excess $200 garners a 29% credit, which is $58. In total, you save $88 worth of taxes, which is roughly 50% higher than if you claimed donations individually.
That’s not all. This strategy also helps maximize provincial tax credits, which you’ll discover now.
Provincial charitable tax credits
Every Canadian taxpayer can access federal charitable donation tax credits, but there’s another layer. Every province has a charitable donation tax credits incentive of its own.
Ontario’s rate is 20.05% for donations under $200 and 40.16% for donations over $200, increased to 44.16% for people in the top income bracket (over $235,675).
Ontario (along with Nunavut) has the lowest charitable tax credit rates among Canadian provinces. In contrast, the highest overall rates are in Alberta: 75% for donations under $200 and 54% for higher donations from top earners. Regardless of where the grass may be greener, tax credits will save you money.
The provincial incentive will trigger on top of your federal incentive. When you’re doing your taxes, obtain provincial Form 428 and fill out Line 58969.
It’s wholesome that Canada provides an incentive for everyone to support a cause, give back to the community, and stand up for the less fortunate. Contact us today and share your goals. We’ll create an actionable plan to use charitable tax credits to your advantage.
