The start of fall marks a lot of things, among them a number of runs, walks, and other similar events held to raise money for a broad range of Canadian charities. And, in a few months, as the holiday season approaches, charities will launch their year-end marketing campaigns.
Canadians have a well-deserved reputation for supporting charitable causes, through donations of both money and goods. Our tax system supports that generosity by providing a tax credit, at both the federal and provincial/territorial levels, for qualifying donations made. Federally, taxpayers can claim a credit of 15% of the first $200 in donations plus 29% of donations over the $200 threshold. The tax credit provided by the provinces and territories works in much the same way, in that a tax credit is provided on the first $200 in donations at the lowest tax rate imposed by that province or territory, and a credit on donations above the $200 level at the province or territory’s highest tax rate. The only exceptions are the provinces of Alberta and Quebec. Alberta provides a credit of 10% on the first $200 in donations, and an enhanced credit of 21% on the balance. Quebec provides a charitable donations tax credit on the first $200 of donations at the 20% rate applicable to its middle income bracket. Donations above the $200 threshold are eligible for credit at the province’s top tax rate of 24%.
As is the case with most expenditures that benefit from favourable tax treatment, in order to make a claim for the charitable donations tax credit in a year, a donation must be made by the end of that calendar year. And, this year and next, there is an additional incentive to maximize donations made, in the form of a “First-Time Donors Super Credit”.
The name of the program is somewhat misleading, as the credit is not available just to first-time donors, but to anyone who has not claimed a charitable donations tax credit in recent years. Specifically, where neither a taxpayer nor his or her spouse has claimed a charitable donations tax credit for any year after 2007, either will be able to claim the “super credit” for donations made in 2016 or 2017.
The name “super credit”, however, is not a misnomer. While the usual federal tax credit rate for donations under and above the $200 threshold is 15% and 29% respectively, the super credit supplements the value of such credit by 25%, as shown in the following example provided on the CRA website:
An eligible first-time donor claims $700 of charitable donations in 2016, of which $300 are donations of money. The charitable donations tax credit (CDTC) and the first-time donor’s super credit (FDSC) would be calculated as follows:
- On the first $200 of charitable donations claimed, the CDTC is ($200 x 15%) = $30.
- On the donations claimed in excess of $200, the CDTC is [($700 − $200) x 29%] = $145.
- On the donations that are gifts of money, the FDSC is ($300 x 25%) = $75.
- The total of the CDTC and FDSC is $250.
There are a couple of restrictions on donations which qualify for the super credit. Only donations of money (not goods) will qualify for the super credit. As is the usual rule for charitable donations tax credit claims, the super credit can be claimed by one spouse for donations made by either, or can be shared between spouses. However the super credit is divided, it can be claimed on only $1,000 in total donations. As well, the super credit can be claimed only once.
Since the charitable donations tax credit is a two-level credit, in which the credit percentage increases once donations made in a year exceed $200, it always makes sense to aggregate donations in a single year, so as to maximize the amount of credit claimable. That advice applies especially to taxpayers who are eligible to claim the super credit, which can only be claimed once.
The super credit will be claimable only for donations made to registered charities. Any charity seeking or receiving a donation should be able to provide a registered charitable number, and a searchable current listing of registered charities can be found on the Canada Revenue Agency website at www.cra-arc.gc.ca/chrts-gvng/lstngs/menu-eng.html, and information on the charitable donations tax credit and the super credit is available on the same website at www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns300-350/349/menu-eng.html.
The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.