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Donations in the Year of Death and in the Will
Income Tax Act s. 118.1(1), 118.1(4), 118.1(5), 118.1(5.1), 118.1(5.2), 118.1(5.3)
Up to 100% of a taxpayer's net income can be claimed as donations in the year of death and the year preceding death, for purposes of calculating the charitable donations tax credit (CDTC).
Donations by Will and Designation Donations
For the 2016 and subsequent taxation years, donations by will and designation donations will be deemed to have been made by the estate, and where certain conditions are met, by the individual's graduated rate estate (GRE).
Also, the available donation may be allocated among any of:
The current limits that apply to determine the total donations that are creditable in a year will continue to apply. A qualifying donation will be a donation effected by a transfer, within the first 36 months after the individual's death, of property to a qualified donee.
An estate will continue to be able to claim a charitable donation tax credit in respect of other donations in the year in which the donation is made or in any of the 5 following years (or 10 years for gifts of certified ecologically sensitive land made after February 10, 2014).
For more complete information see T4011 Line 34900 - Donations and gifts.
Timing of Donations in the Will Prior to 2016
Prior to 2016, when a donation or gift was bequeathed in the will, it was deemed to have been made immediately before the individual died.
A person can designate a charitable organization (qualified donee) as the beneficiary of an RRSP, RRIF, TFSA, or life insurance policy (with some exclusions). When this is done, as long as the transfer to the charitable organization occurs in the 36-month period that begins at the time of death, the transfer is deemed to be a donation or gift made immediately before the individual's death. Written application can be made to the Minister of National Revenue to extend the 36-month period.
When a designation donation is done, the financial institution will not normally withhold income tax when paying out the balance of an RRSP or RRIF to a beneficiary. Thus, an estate should be planned so that sufficient funds will be available, other than accounts with named beneficiaries, to pay any income tax owing by the deceased. For more on this topic and a court case, see Are Taxes Withheld From Payments to Beneficiaries of RRSPs or RRIFs?
Donations on Deceased Final Tax Return
On the final tax return for the deceased person, you can claim all donations or gifts made in the year of death, those bequeathed in the will, directly transferred from RRSPs, RRIFs, TFSAs, or life insurance policies, and any carried forward from previous years, to a maximum of 100% of the taxpayer's net income. Net income in the year of death is increased by proceeds of RRSPs and RRIFs as well as proceeds from the deemed disposal of any capital assets owned. Any excess donations can be claimed on the tax return for the previous year, again to a maximum of 100% of the taxpayer's net income. Donations cannot be carried forward from a T1 return to a T3 return.
Donations Claimed by Surviving Spouse
The donation tax credit for donations made in the year of death can be claimed by either the deceased or the surviving spouse. As a matter of administrative practice, donations or gifts made by a deceased person will be accepted by Canada Revenue Agency (CRA) as being donations or gifts of the surviving spouse. However, this assumes that a spousal or common-law partnership existed at the time of the donation. As an example of this, see the Douziech Tax Court Case from 2000. In this case, the donations were made in the year of death, but before the couple married.
When the surviving spouse claims the donations of the deceased spouse, this would be done on the tax return for the year of the spouse's death. The maximum amount that may be claimed as donations would be 75% of the net income of the surviving spouse. See the CRA Technical Interpretation 2010-032621E5 for more information.
- Compare alternatives to see if it is better to claim donations and gifts made in the year of death on the return of the deceased or of the surviving spouse.
- This can be complicated, so professional tax advice is recommended.
TaxTips.ca ResourcesDonations tax credit
Donations of capital property - can eliminate the capital gain on that property
Canada Revenue Agency (CRA) ResourcesP113 Gifts and Income Tax
T4011 Preparing Returns for Deceased Persons
- Line 34900 Donations and gifts
- Graduated rate estate (GRE) definition
Revised: December 13, 2022
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