Only donations (gifts) to registered charities and other
qualified donees (see the Canada Revenue Agency (CRA) definition for a qualified donee) can be claimed
as charitable donations. CRA has a web page, Charities
and Giving, where you can search charities listings to see if a
particular charity is a registered charity.
If any "advantage" was received (compensation or other
benefits) in return for the donation (e.g., tickets, meals), the eligible gift
for purposes of the donation claim is reduced by the value of the advantage
The tax credit for donations and gifts is in the form of a non-refundable
tax credit, and is claimed on Line 349 on Schedule 1 of the federal tax
return (Provincial Line 5896).
The tax credit for the first $200 of donations is at the lowest personal tax
rate (except for Québec, which uses 20%), and the tax credit
for the amount over $200 is at the highest tax rate federally, and for all provinces and
territories except Alberta, New Brunswick and Ontario. Alberta has only one tax rate (10%) for
calculating income taxes, but uses 21% as the rate for donations over $200.
New Brunswick reduced their highest tax rate a few years ago, but did not
reduce the rate used for donations over $200. Ontario increased their
highest tax rate in 2012, and again in 2013, but still uses the 2011 highest
tax rate for donations over $200.
Optimizing the Donation Tax Credit
When a taxpayer has a spouse or common law partner and the
combined donations are greater than $200, the donations for both
spouses should usually be combined and claimed on one tax return. Check
your tax return carefully in relation to donations. It is possible that
by claiming all donations on one tax return, the donations may not be
completely utilized. If this is the case, you can either carry forward
some of the donations, or split the donations between spouses.
In order to split donations between spouses in some tax
you may have to manually override the field utilized for this purpose. If you override the donations amount
in the wrong form, the
tax return may no longer be eligible for NetFile. Some tax software
packages allow this to be done without overriding an amount.
By splitting the donation between spouses, you are giving
up the higher tax credit rate on $200 of donations, because there will now be
$200 of donations at the lower tax credit rate for each spouse, instead of for
just one spouse.
Both the Canadian
Tax Calculator and the Québec
Tax Calculator will alert you if your donations exceed 75% of net income,
or if your donations are not fully utilized.
Donations need not be claimed in the year they are
paid. They can be carried forward for up to 5 years. Under the CRA's
administrative policy, and as detailed in the CRA Technical
Interpretation 2010-0377811E5, it is permissible for a charitable donation
that was initially reported on one spouse or common-law partner's return to be
transferred to the other spouse or common-law partner in a subsequent year.