With donations, the more you give, the more you save!
by Exec. Director Peter Rozeluk
As a tax accountant I was often asked by clients if there was any benefit to making a charitable donation. My answer was always yes – because the intangible benefits were always greater than the obvious tax benefit, which often was the real focus of the question.
The big change this year related to charitable donations is the extra 25% credit for donations made after March 31, 2013. There is a requirement though that neither you nor your spouse can have claimed a donation since 2007. This credit is available until 2017.
Sadly, unclaimed donations from prior years won’t qualify for this extra credit. Because the donation credit’s value increases with donations over $200, consider combining donations on one spouse’s return and carry forward smaller donations.
But quite apart from this new tax change, there is a tax benefit that has always been there and gives meaning to the title of this blog. You need to know that the first $200 of your total donations result in a credit at the lowest tax rate. However, donations over $200 result in a tax credit at the highest tax rate. So it is possible for a person to get more back in a tax refund from a donation than the tax they paid on the earned income they donated. For those who are not in the top tax bracket, there is a sweet spot of making donations totaling more than $200.
For examples of the FDSC, visit http://www.cra-arc.gc.ca/fdsc/
For frequently asked questions, visit http://www.cra-arc.gc.ca/gncy/bdgt/2013/qa01-eng.html