Understanding the Tax Benefits of Charitable Donations

Canada has a generous tax credit system for donors to charities. Donating to a cause that’s 

close to your heart not only provides support for something you’re passionate about, your donation can also yield a tax break.

The Charitable Donations Tax Credit can be up to 33 percent of the amount you donated at the federal level. You may also be entitled to an additional amount reaching up to 24 percent of your donation depending on your province of residence. There are several rules that determine whether you qualify.

Eligible Donations

Who qualifies for the Donation tax credit?

Anyone who makes a donation to a qualifying donee is eligible for the CDTC. A donation is defined as a gift for which no compensation is given in return. Your donation can be in the form of money or anything else of value, such as real estate, stocks, ecological and cultural gifts, and so on. If you receive something in exchange for your donation, such as show tickets, the value of what you received must be deducted from the amount you donated, and you can only claim the CDTC for the difference. Check out this CRA link to see if you can make a qualified donation.

What is a qualifying donee?

A qualifying donee is a registered charity or one of several other public organizations, such as an amateur athletic association, a resisted institution, a municipality, a province, or a territory which can issue tax receipts. Make certain that you obtain a receipt and that the donee is legally permitted to do so. The Canada Revenue Agency maintains a searchable online database where you can determine whether a charity is registered and eligible to issue official donation receipts. You can also check a registered charity’s status by calling the CRA at 1-800-267-2384.

Keep an eye out for donation schemes. Before you make the donation, check this CRA link for tips on avoiding fraud.

Claiming and Calculating the Credit

How can I claim my donations?

To claim your credit, you must include it on both your federal and provincial tax returns. At the federal level, your credit will be 15% of the first $200 in donations and 29% of any additional donations. If you are in the highest tax bracket, the credit can increase to 33 percent under certain conditions. All provinces also have comparable credits, which range between 4% and 24%. The CRA offers an online tool for calculating your credit, which includes the provincial component. Check out the CRA link to see how much tax credit you can get for your donations.

How does the donation credit affect my taxes?

Tax credits for donations and gifts are non-refundable. This means you must first claim your other credits. If that amount is sufficient to reduce your tax liability to zero, you will not be able to use charity donations to create or increase your tax refund. If you still owe taxes, you can deduct all or a portion of the donation amount. Unused donations can be carried forward for up to 5 years, but donations can only be claimed once.

Is there a maximum I can claim?

Yes, your total donations can be up to 75% of your net income unless you are a member of perpetual poverty. Members of perpetual poverty can donate their entire earned income and claim it as a deduction on line 25600 of their Income Tax and Benefit Return.

How can I get a list of my charitable donations?

Each charitable institution will send you a tax receipt for your total donations for the tax year prior to the income tax due date. Keep in mind that because charitable donations are at the top of the list for post-assessment, the CRA may request proof of the donations. You will have to provide a tax receipt. A copy of your original bill of payment will not be accepted by the CRA.

Check your income tax slips; T4, T4A, T3, T5013 slips, or partnership financial statements if you contribute to donations through your employer or pension.

Donations From Previous Years

Because the CDTC is greater for donations over $200, it may be worthwhile to save your donations and claim them all at once in the same year. You can accumulate donations in two ways: you can combine them with your spouse’s on a single tax return, or you can claim donations from multiple years in the same year. Donations can be carried over for a period of up to five years.
If you need to know if you have previously claimed donations, you can use the CRA’s My Account online service. Once you’ve logged in, go to the top of the page and click on the tax returns tab. You can view previous years’ tax returns from there. Look at line 349 of your previous T1 General tax return from before 2019 or line 34900 of your Income Tax and Benefit returns from 2019 onwards to see if you claimed donations for the previous five years.