Think about the significant contributions that Canada’s registered charities make to Canadians and people around the world. From helping the disabled, youth and children, seniors, neighbourhoods, communities to feeding the poor and helping people live better lives… supporting charities can have a positive impact on the daily lives of all Canadians, including yours.
In this two part web series from Ted Leyzer, CPA, CA, LPA and Partner at Millards Chartered Professional Accountants in Brantford Leyzer presents ways to ensure that your donations make a difference for both the organization you’re donating to as well as you, the donor. Especially considering that giving to certain organizations can have a positive impact on your personal bottom line.
“That tax credit can be applied to your income tax and benefit return to help you reduce your income tax.”
In simplest terms, your charitable claim earns you both a federal and provincial or territorial tax credit. So A (federal tax credit) plus B (provincial or territorial tax credit) equal C (your total charitable tax credit). In certain cases, the benefit to you can be as much as half of what you give.
“Essentially there are two charitable tax credit rates. Any amount you give above $200 is eligible for a higher rate. You can claim receipts up to five years after you’ve made a donation. So, it may be to your advantage to save your receipts and then claim them all at once. You can also combine your receipts with those of your spouse or common-law partner.”
How can you be sure that you’re donating wisely?
Leyzer suggests that you do your homework.
“Start by visiting the CRA website at cra.gc.ca/donors, to verify an organization’s registration status. Also, keep in mind that while there are many worthwhile causes, only registered charities and other qualified donees can provide you with an official donation receipt for tax purposes.”
Take time to learn about the activities of the organization and get a sense of their financial picture.
“Financial statements don’t always give you the whole picture so contact the charity directly if you have any questions.”
Here are some other quick tips from Leyzer to make sure that you’re donating wisely:
- make cheques payable to the charity and not to an individual who is raising money for the charity or says they work there
- make sure that you’re on a secure site when donating online
- think twice about making a donation if you feel inappropriate pressure or if there are signs of fraud
- beware of tax schemes that offer you an official donation receipt for more than you donate
- if you donate cash, goods, land, or listed securities (like stocks) to a registered charity or other qualified donees, you can get an official donation receipt and a tax credit.
Which donations can help reduce your taxes?
The key is to give to a registered charity—a charitable organization that has a CRA charitable registration number.
“Canadian registered charities can provide you with an official donation receipt for your gifts of money, goods, land, or listed securities to help reduce your taxes.”
Sometimes, charities hold fundraisers where you receive something in return for your donation, like a free meal, or a concert ticket. When this happens, the charity may still issue you an official donation receipt, but they must subtract the value of what they gave you when they issue you a receipt.
Buying a ticket for a raffle or lottery isn’t making a donation so you won’t get an official donation receipt at all.
How do I claim a donation?
When you file your income tax and benefit return, there is a section in your return where you can claim your donations. Remember to keep supporting documents, like your official donation receipts, cancelled cheques, credit card slips, pledge forms, and stubs, in case your return is selected for review. And don’t forget about the donations area on your provincial or territorial tax and credit form.
“The Giving to Charity Information for Donors Web page has all kinds of information about tax savings, donation receipts, the regulation of charities, tax shelters, donating wisely, and avoiding fraud. Just visit cra.gc.ca/donors and explore.”
The CRA maintains a searchable online database called the CRA Charities Listing. This listing includes all registered charities in Canada, and this is where you will find information on any registered charity’s status, financial picture, and activities.
“Of course the Partners and team at Millards is highly capable and accepting new clients so please contact us anytime if you have questions about charitable giving and how you can maximize your donation for the benefit of both you and the charities you support.
Ted Leyzer, CPA, CA, LPA and Partner at Millards Chartered Professional Accountants is actively involved with Brantford CYO Basketball and enjoys working with kids and helping them stay off the streets. His practice areas include auditing and accounting services to credit unions and hospitals and municipalities and providing corporate and personal advice to owner-managed businesses.