How Much Is the Credit for Charitable Donations?
The donation credit is non-refundable and reduces taxes payable. For those who have donated in the past, the credit can be close to 50 cents on the dollar, depending on how much you give. First-time donors can get an extra 25% credit for cash donations up to $1,000.
The amount is calculated on Schedule 9 and then posted to Line 349 of Schedule 1. Your software will have a screen to list your donations and calculate the credit, as follows:
1. The first $200 of total gifts is eligible for a credit at the rate equal to the lowest federal tax bracket (15%).
2. The remainder of the gifts is eligible for a credit at the federal tax rate for the highest tax bracket for the year (29%).
3. When provincial taxes are factored in charitable donations over $200 often return close to 50% of amounts donated.
CASE STUDY: Cash Donations by First Time Donors
Siblings Chloe and Janine each donated $500 cash to the United Way in 2013. Chloe donates regularly but Janine has never claimed a charitable donation on her return. Both are single and live in Ontario.
Each is entitled to the following credits:
Federal: 15% x $200 =$30.00Federal: 29% x ($500 - $200) =$87.00Ontario: 5.05% x $200 =$10.10Ontario: 11.16% x ($500 - $200) =$33.48Total:$160.58
In addition, Janine is eligible for the First-Time Donor’s Super Credit of 25% x $500 = $125. Her total credit for the $500 donation is $160.58 + $125.00 = $285.58.
The allowable claim for the regular donation credit is calculated as follows, based on your qualified gifts which can include cash, publicly traded securities and mutual funds, life insurance policies, personal use property, capital property, depreciable assets, cultural and ecological gifts:
· First, your donations limit is the least of
o your total charitable gifts for the year
o 75% of your net income for the year plus 25% of
§ capital gains on gifts
§ reserves from the prior year on gifts of non-qualifying securities
§ recapture on gifts of depreciable property
§ the lesser of net proceeds from gifted depreciable property and the capital cost of that property
minus any capital gains deduction claimed on gifted property
· Then add 100% of your total cultural gifts and total ecological gifts.
Cultural gifts are gifts of objects that the Canadian Cultural Property Export Review Board has determined meet the criteria set out in the Cultural Property Export and Import Act.
Ecological gifts are gifts of land which is certified by the Minister to be ecologically sensitive land, the preservation of which is important to the preservation of Canada’s ecological heritage. Such gifts must be made to Canada, a province, a municipality, or a registered charity whose main purpose is the preservation of Canada’s environmental heritage. The taxation of the capital gains on such gifts is completely eliminated.