Charitable Donation Tax Credit

Life is expensive enough with inflation — tax time just adds fuel to the fire. However, Canadian tax laws offer some relief with certain credits and deductions, including the charitable donation tax credit. Of course, a certified financial planner or investment advisor can help you determine the best ways to access these benefits and build savings. We have a whole roster of financial professionals here at Advisorsavvy that we connect to Canadians like yourself every day. 

But if you’re tight on time? Keep reading for our financial-planner-approved breakdown of the charitable donation tax credit. The gist? If you donate money to a qualified charity, you can deduct the eligible amount and receive a tax credit. But how do you know who you can donate to, and how much can you really get back? We’ll cover all those questions and more in this up to date guide. Keep reading to learn more!

donation tax credit

What is the donation tax credit in Canada?

The donation tax credit in Canada is a tax refund that you receive if you donate an eligible amount to a qualified charity or organization in Canada. Eligible amounts encompass all donations up to 75% of your net yearly income. Canadians can access two types of donation tax credits: federal and provincial (or territorial). The federal charitable donation tax credit is:

  • 15% on the first $200
  • 29% on donations over $200

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The provincial charitable donation tax credit varies by province or territory. Here’s a quick view of the latest rates on the first $200 and anything past that by province or territory: 

Province or TerritoryTax rate on first $200Tax rate on amounts over $200
British Columbia5.06%14.70%
Nova Scotia8.79%21.00%
New Brunswick9.68%17.95%
Newfoundland and Labrador8.70%18.30%
Northwest Territories5.90%14.05%
Prince Edward Island9.80%16.70%

Let’s put these rates into a real-life scenario. Say you make $60,000 a year and you donated $500 to your neighborhood food charity in Ontario. Your federal tax credit would be 15% of the first $200 ($30) and 29% on the remaining $300 ($87). Your total federal tax credit is $117. Since you live in Ontario, your provincial tax credit would be 5.05% of the first $200 ($10.10) and 11.16% on the remaining $300 ($33.48). Your total provincial tax credit for Ontario is $43.58. All in all, your total tax deduction for charitable donations is $160.58.

What is a tax receipt?

A tax receipt is a written record of your payment to a business or organization used to verify your eligibility to deduct the expense or receive a tax credit. In the case of charitable donations, the tax receipt confirms that you did indeed donate the said amount to a registered charity. There is some required information that must appear on a tax receipt for a charitable donation, such as the charity registration number, date and amount.

Related Reading: How Long to Keep Financial Records in Canada

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How does the donation tax credit work in Canada?

Canadians can donate tax-deductible sums to qualified charities and other organizations within Canada. Here’s a list of donees approved by the Canadian Revenue Agency for tax-deductible donations: 

  • Registered Canadian charities
  • Registered national arts service organizations
  • Registered journalism organizations
  • Registered municipalities and public bodies in Canada
  • United Nations and associated agencies
  • Registered universities with a Canadian student body
  • Registered Canadian amateur athletic associations
  • Registered housing corporations in Canada meant to offer low-cost accommodations to older Canadians
  • Registered foreign charities if the Government of Canada has given a gift to 

Are you curious if the organization you’d like to donate to is qualified for tax benefits? You can use the qualified donees and registered charities search page on the Canadian government’s website here. For example, if you type in “humane society,” you’ll generate results with various human society branches in different Canadian cities, such as the Cambridge and District Humane Society, or Thunder Bay and District Humane Society. This tool allows you to verify if the entity is registered and thus if your donation will be tax deductible or not.

But you can also receive a charitable donation tax credit in addition to your deduction. We list provincial and federal charitable tax rates in the previous section, but you can view the updated rates on this CRA webpage as well. Quick federal reference? 15% of the first $200 and 29% on anything past that. Provincial and territorial donation tax credit rates vary. 

What is the first-time donor tax credit?

First time donating to a charitable organization? If you or your common-law partner haven’t claimed a charitable donation deduction or tax credit after 2007, you’re considered a first-time donor. Meaning? You can receive an additional federal tax credit of 25% on the first $1,000 you donate. 

How much do charitable donations reduce taxes in Canada?

The charitable donation tax credit is a significant benefit in Canada. It does reduce taxes because the Canadian government wants to motivate people to give back to society through its tax system. However, the exact amount that it reduces tax depends on which province or territory you live in. On the low end, donations up to $200 yield a 4% credit in Nunavut and 20% in Quebec, with all other provinces and territories in the middle. Donations over $200 can yield 11.16% in Ontario and 24% in Quebec.

How much of a donation is tax deductible in Canada?

The entire of amount of your donation to a qualified organization is tax deductible in Canada, minus any advantage you might receive from that donation. For example, let’s say you donated $1,000 to a charity that gives clothing to homeless people and also sells certain pieces at discounted prices. As a token of their gratitude, the company offers you a $100 credit to purchase their clothes. In this case, you’d be eligible to claim $1,000 minus the $100 advantage, for a total tax-deductible amount of $900. 

The only caveat? The deductible amount cannot be more than 75% of your net yearly income. So if you make $100,000 per year, you can deduct up to a $75,000 eligible donation amount to a qualified Canadian charity or organization. 

What is the donation credit for the year of death?

Let’s say you or your spouse pass away. The Canadian government recognizes your year of death as eligible for charitable tax amount credits up to 100% of your yearly income. Meaning? You can donate 100% of your spouse’s income to charity and the entire amount is eligible for a deduction and credit, versus the 75% eligible when you’re still alive. 

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Are donations tax deductible?

Yes, donations are tax-deductible. However, they’re only considered tax deductible if you donate to an approved and registered organization. Let’s say your friend needs $500 to buy a car — and instead of lending it, you give money to him. Unfortunately, you won’t get far trying to deduct that as a charitable donation. Rather, it would be considered a gift. The same goes for donations on GoFundMe, investments, or donations to private businesses that aren’t registered as charities or other organizations listed on this Canadian government resource

As a regulation, charities must meet certain criteria and provide annual reporting to the government. If they don’t meet this criteria and are not registered, they’re not considered a real charity and monies given to them are not tax deductible.

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Is GoFundMe tax deductible?

GoFundMe publishes fundraisers for individuals, businesses, and other organizations. The only problem? Most of them aren’t registered Canadian charities, meaning your donations to GoFundMe aren’t tax deductible. 

Are church donations tax deductible in Canada?

Some churches are registered with the Canada Revenue Agency as official charities. If you donate to those ones, your donation is considered tax deductible. However, this isn’t the case with all churches. If you want to double-check that your church is eligible, check this government list of qualified donees

Can you claim donations without receipts in Canada?

No, you cannot claim donations without a tax receipt in Canada. Make sure you always ask your donee for an official receipt. Even if you show a bank withdrawal or e-transfer to the organization, the CRA won’t approve the claim for it unless the organization issues you a receipt. 

Related Reading: Types of Investment Accounts in Canada

What is the cutoff date for charitable donations in Canada?

The cutoff date for charitable donations in Canada is December 31st. In other words, you can donate throughout the calendar year and claim it on that year’s tax return.

What time of year is best to make charitable donations?

Any time is a good time to donate, but most Canadian taxpayers decide to donate around the holiday time of the year. This usually falls around November and December (so, right now!) This is because it’s a good time to evaluate excess cash available to donate and take advantage of last minute tax breaks. In addition, people are usually in the mood to give around the holiday season. Just make sure to get all your donations in and receipts well before the cutoff date of December 31st. 

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Why make a year-end donation?

Bottom line? Year-end donations help you redirect funds towards a cause that you’re passionate about versus the CRA. It’s a pro for networking and finding community while limiting the amount of money you have to shell out for taxes. Plus, it feels great to help out a good cause and share money with others who may not be as fortunate.

Interested in finding more ways to manage or preserve your money? You’re in good hands with AdvisorSavvy. We match Canadians like yourself with their choice of financial advisors, credit counsellors, insurance brokers, money coaches, or investment advisors to fulfill diverse financial needs. Whether you’re looking to preserve your wealth, manage your income, or grow your investments, rest assured you’ll have a dedicated confidante and knowledgeable expert to support you along the way. Ready to take control of your finances? Get matched with a financial planner today!

Read More: How to Make the Most Impact with Your Charitable Donations in Canada

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