As the Christmas season fast approaches, many of us are considering charitable gifting. Giving to charity can be a great way to support the wider community and feel good. You can give through the gift of time (volunteering at a local food bank or soup kitchen) or the gift of money. Cash donations not only allow you to give back but come with the bonus of a charitable donation receipt to lower your tax bill. Here are some things to consider with charitable gifting.
You want Tax Credits, Not Deductions: Contributions can be made to many worthwhile causes and non-profit organizations. Only donations to registered charities qualify for an income tax credit. For more information, check the Canada Revenue Agency (CRA) Donations and Gifts, which is Line 349 of the General Income Tax and Benefit Guide.
Be Sure to Keep Receipts: This should have the charity’s name and registration number, date, serial number, amount donated, donor’s name, and be signed on behalf of the organization. The receipts also should have the website address of the Canada Revenue Agency www.cra-arc.gc.ca/charities.
Spouses: Donations made by one spouse or common-law partner can be claimed by either one. To maximize the credit, all donations should be lumped together. It doesn’t matter which person, either of you can use the credit as long as you pay taxes.
Carry Donations Forward: Some or all of your donations may be carried forward for up to five years. This should be done to take advantage of the higher credit over $200. Donations made in years of low income or when other credits are used (so no taxes would be paid anyway) should be carried forward. Also, you have until the end of this year to take advantage of the First-Time Donor’s Super Credit.
Donations at Work: Remember to claim donations made through your workplace; these are recorded in Box 46 of the T4 slip from your employer. As well, include donations made through pension or other income (Box 46 of T4A slips) and through investment income on Box 48 of T3 slips, Box 103 of T5013 slips and Box 13 of T5003 slips.
Donate Stocks: New rules now encourage the donation of publicly traded securities (stocks, bonds, etc.) that have appreciated in value as there is no capital gains tax on these gifts. This can be a significant benefit as you get the tax credit on the higher amount, but you do not pay any tax on the gain. Check with your charity about how to make such a gift.
Lastly, Avoid Scams: Some people donate to bogus charities offering tax credits for significantly more than they actually donated. Don’t run the risk of having all your donations disallowed. If it seems “too good to be true,” it probably is. Give to give, not just for an inflated tax break.
For these situations and for more information on the above tips, see the CRA booklet Gifts and Income Tax, and a list of other publications. If your unsure about the tax treatment but wanting to gift before the end of 2017, consult with your tax professional for more information as to what qualifies and what does not.
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