Donation receipts and taxes in Canada

Question

How much money should I spend on donations for charities per year to have it benefit me when tax time comes?

Answer 1

On your personal tax return, you can claim on line 340 charitable deductions and gifts of up to 75 percent of your net income (line 236). The exception to this rule relates to the taxpayer’s death. For the year a person dies and the year before that, this limit is 100 percent of the person's net income.

You cannot claim charitable donations to create or increase a loss but unused charitable donations can be carried forward and used in any of the five following tax years.

Answer 2

Any donations you make to Canadian registered charities may help reduce your income tax.

In 2008, the first $200 you donate is eligible for a federal tax credit of 15% of the donation amount plus a provincial credit depending on your province of residence - e.g. Ont. 6.05% and BC 5.24%.  After the first $200, the federal tax credit increases to 29% of the amount over $200. Again, you would be eligible for a provincial credit - Ont. 17.41% and BC 14.7%.

In summary, if you live in Ontario, you would receive a tax benefit of 21.05% of every dollar you donated on the first $200 you give and 46.41% on everything in excess of $200 (provided you file an official receipt with your tax return and that you would otherwise be paying tax, i.e. if you don't have any taxable income you wouldn't get a benefit as the tax benefit is a reduction of taxes payable). In other words, you get a benefit at the full marginal combined federal and provincial tax rate to the extent your donations exceed $200. On the first $200, you get a benefit at the lowest marginal tax rate.

You can carry forward any donations you do not claim in the current year and claim them on your return for any of the next five years.