Maximize Claim for Charitable Donations

Donations can be made to the following organizations and the taxpayer or spouse, will be able to claim a tax credit:

• Registered charities – These organizations must be registered with CRA, and in order to obtain charitable status the funds received must be utilized to achieve one of the following objectives – relief of poverty, advancement of religion, advancement of education, or other purposes beneficial to the community
• Canadian amateur athletic organizations
• Canadian municipalities
• United Nations
• Non-profit housing corporations
• Charitable organizations outside of Canada, if the Canadian government has made a contribution in the current or preceding year.

The first $200 of donation qualifies for a 16% federal tax credit and donations in excess of $200 qualify for a 29% credit. There are also provincial credits for donations. In order to maximize their claim for charitable donations, families should consider the following strategies:

• One spouse should claim the charitable donations of both spouses to ensure the maximum tax credit is received. If the donations were split, the family would have $400 of donations receiving a tax credit at the 16% rate, whereas if one spouse claims all donations, only $200 would be subject to the lower rate
• Ensure receipts are received for all donations
• Consider gifting stocks. The donation of an investment is a deemed disposition for income tax purposes, thus a capital gain or loss will result. Normally 50% of the gain is included in income, but if the stock is gifted to a charitable organization, only 25% of the gain will be included in income. Thus, donation stocks may be a tax effective method of funding a charitable donation.