Should I Think About Taxes When Making a Donation?

Dear @financial_laura,
I’ve recently made a gofundme donation and I’m wondering if I should be claiming that on my taxes?

Over these last few weeks the waves of tragic events have been overwhelming.  I’ve been having a hard time reading the news without feelings of incredible vulnerability in the face of these devastating moments in time.

It’s human nature to want to do something…anything…to help.  The outpouring of support for the Humboldt team was truly awe-inspiring.  It’s often hard to put a monetary figure on generosity, but $15,175,500 from 142,000 individuals is amazing.

Nothing says an uplifting blog post like talking about tragedy and then taxes, but here goes…

Probably because it is tax season, I’ve received a number of questions about making these types of spontaneous donations.

There is an important CRA distinction when it comes to making a donation: whether the donation is made to a registered charity.  Gofundme campaigns, like the Humboldt one, are not registered charities, and therefore no tax receipt is provided and the donation amount cannot be claimed as a tax credit.

If you want to confirm whether the charity is registered, you can search here: List of Canadian Registered Charities

However, the majority of the significant donations you would make (I’m not talking about giving $2 in a check out line), either at work, church, or school would qualify.  You must receive a tax receipt for reporting purposes and an audit trail.

What’s the value of a tax credit?

The nice thing about donations is that the benefit is not income-based.  Everyone receives the same credit which changes solely based on the amount of the donation.

1. Donations under $200

Donations under $200 are eligible for a federal 15% tax credit which reduces taxable income.  In addition, there is a provincial tax credit (in Ontario it’s 5.05%).

Let’s assume you live in Ontario and make a $100 donation to a registered charity (and have a receipt!).

The $100 qualifies you for the federal 15% tax credit and a $15 reduction in your net taxable income and the provincial tax credit of 5.05% or $5.05.  For a total credit of $20.05.

Easy.

2. Donations over $200

A donation above $200 is a two-step calculation.  First you receive the 15% (federal) and 5.05% (provincial) tax credit on the initial $200, and anything above that amount you receive a federal 29% tax credit and provincial 11.16% (in Ontario).

Now let’s say you made cumulative donations over the course of the year (and have receipts!) for an amount of $500.

You would receive $40.10 (or 20.05%) for the first $200 in donations and then the remaining $300 would net you an additional federal tax credit of $87.00 (300 x 29%) and provincial tax credit of $33.48 (300 x 11.16%).  For a total tax credit of $160.58.

Tips for Maximizing the Benefit

Any donation made in the last five years can be accumulated and claimed.  To truly maximize the credit, you can stockpile all your donations over any five year period and then claim them all on one tax return.  In addition, a couple is able to combine their donations and have the sum claimed by the highest earner.

Or….

Move to Quebec!  They have the most generous tax credit rates (interestingly Ontario is one of the lowest).  In Quebec your first $200 receives a credit of 20% on top of the federal 15%!

Clear as mud?

Don’t mess around, just punch your donations into this handy government calculator:

CRA Donation tax credit calculator
Is there a maximum donation amount?

In typical suspicious Canadian fashion you might be wondering if there is a maximum amount you can claim, especially if you are stockpiling for five years.  Unlike the donations themselves, the donation limit is net income based.  You can claim up to 75% of your net income.  So, if you earn $60,000 in net income you may claim up to $45,000 in donations.  CRA sets that generosity bar really high!!

“Grief does not change you…it reveals you” – John Green

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