Are Charitable Donations Tax Deductible: Everything You Need to Know
The old saying goes that it’s better to give than to receive. If you aren’t convinced, research has shown that supporting other people can make you happier and may actually help you live longer.
Another added bonus? Doing good can reduce your tax bill when it’s time to write a check to the Canada Revenue Agency (CRA).
If you’re interested in donating to a good cause while also reaping the tax benefits of charitable giving, it’s important to understand the tax rules. This article explains whether charitable donations are tax deductible, how they work, and other important aspects you need to know about.
What is a charitable donation tax credit?
A charitable donation tax credit is a credit that reduces your tax liability for the year in which you make a donation, reducing the amount of taxes you pay. This means you’re able to support a cause close to your heart while getting a tax break at the same time.
When making a personal donation, you’ll receive a tax receipt. This receipt will contain your donation amount, the charity’s name, and its registration number. You’ll then use this tax receipt to claim your charitable donation tax credit on your tax return before April 30th.
In Canada, you can claim federal and provincial or territorial non-refundable tax credits for part or all of the eligible amount of your gifts, up to the limit of 75% of your net income for the year. By saving your receipts, you can qualify for a federal tax credit of 15% of the first $200 of donations and 29% of your additional donations (33% for those in the highest tax bracket).
In addition to the federal tax credit, you can get from 4% to 25.75% provincial or territorial credits. However, the rates vary from one province to another and you’ll need to donate to a registered charity or one of several other public organizations.
Which charities qualify for the charitable donations tax credit?
To be eligible for a tax credit, you need to donate to a registered charity, such as a non-profit organization, foundation, or certain religious organizations. You should always check with the CRA to ensure they are a registered charity before you donate.
Here are some of the organizations that qualify:
- Canadian amateur athletic associations
- Universities outside Canada
- Municipal or public bodies performing a function of government in Canada
- Municipalities
- Foreign charities that have received a gift from His Majesty in right of Canada
- Registered journalism organizations
- Low-cost housing corporations for the aged
If you donate to an organization that’s not recognized by the CRA, then you won’t be able to claim.
How do I claim a deduction for charitable donations?
All Canadians can claim the charitable donations tax credit if they have an official donation receipt. As long as you choose one of the charities that qualify for tax-deductible donations and don’t receive anything in return, you can claim the full donation.
If you do receive anything in exchange for your charitable donation, then the value of what you received must be taken off the amount you donated. This could be in the form of money or anything else of value, such as property, stocks, gifts, or tickets.
When it comes to claiming your credit, you report it on your federal and provincial tax returns along with your tax receipt. The credit is calculated on the Schedule 9 section of the federal tax form. The federal credit is claimed at Line 34900 of the T1 form, and the provincial credit is claimed at Line 58969 of the provincial Form 428.
Please note: You don’t have to claim the eligible donations you made in the year on your income tax return for that current year. You can carry them forward and claim them on your return for any of the next five years. However, you can claim them only once.
You have to claim tax credits for donations you carried forward from a previous year before you claim tax credits for donations you give in the current year.
Charitable donation tax credit: Top tips
If you want to make the most of your charitable contributions, you’ll want to keep these tax tips in mind.
Always ask for receipts
As you’ve probably already guessed, it’s absolutely essential you get a tax receipt as proof of your charitable donation, otherwise you won’t be eligible. The receipt needs to be included when you complete your tax return and will state the amount you’ve donated, the charity’s name, and its registration number.
Time your donation correctly
In Canada, you have to file your tax return on or before April 30th. This ensures you avoid late-filing penalties and interest. However, it’s important to remember that you can claim your charitable donations for up to five years, meaning you can accumulate multiple years’ worth and file them together.
Transferring your charitable donation tax credits to a spouse or common-law partner
If claiming your donations will not affect your tax bill or refund, then you can transfer all or some of your charitable donations to your spouse. By pooling donations, you can actually earn a bigger credit.
Make sure you claim personal benefits and gifts
Don’t forget to claim any incentives, personal benefits, or gifts from your donation. The CRA requires you to subtract that cost from the amount you plan on claiming as a charitable donation.
For example, if you receive tickets to an event valued at $25 for your donation of $200 to an organization, you could only claim $175 as a charitable donation on your taxes.
Consider working with a tax professional
Tax laws can change on a yearly basis and everyone’s situation is different, so you may wish to consider working with a tax professional before following any of the advice outlined in this guide. A tax professional will ensure you’re adhering to tax laws, and they’ll be able to help you maximize charity tax deductions.
Are GoFundMe contributions tax deductible?
In the age of crowdfunding and fundraising online, it has never been easier to support your favorite charity. Technology has changed the way people all over the world help others. Lending a digital hand to those in need is now effortless, and finding the best charities to donate to takes no time at all.
The top charity fundraising sites have done an incredible job of simplifying the giving process for donors and organizers alike. Reputable crowdfunding platforms issue tax-deductible receipts for donations made to certified charity fundraisers. They also give donors a way to easily track their donations in one place.
So, yes, if donations are made to a certified charity fundraiser, then GoFundMe contributions are tax deductible. Remember to check with the CRA to ensure they are a registered charity before you donate.
Give back to an online charity fundraiser
Thousands of people have used GoFundMe to give back to causes they care about. Through our platform, individuals can quickly donate to certified charities and become part of an online community of people who share similar passions.
Discover charity fundraisers on GoFundMe, then make a tax-deductible donation to your favorite today.
If you’d like to make an even bigger impact, give back with charity fundraising by starting your very own crowdfunding fundraiser. Sign up now and start making a difference for those in need.