At any given point in time an individual may have charitable intentions. Taking the time to ensure your charitable gifts are aligned to your larger financial planning objectives while monitored and updated is the key to lifetime financial success. Having a clear picture of your options and associated tax rules will allow for complete integration of the charitable gifts into your comprehensive financial plan.
Charitable Donation Basic Tax Rules
- Federal and Provincial Tax credits are dollar for dollar reductions on taxes payable.
- Federal Non-Refundable Tax Credits equal to 15% on the first $200 and 29% thereafter.
- Provincial Tax Credits equal to 5.05% on the first $200 charitable donation and 11.16% thereafter.
- Normally, charitable donations may be claimed up to a limit of 75% of a tax payer’s net income.
Example of Planned Giving
Britney inherits a substantial estate and decides to donate $75K to a local registered charity who provides ongoing support and care for her disabled brother and family. Her net income in that year was $60K.
The maximum amount that Britney can claim for her charitable donation is $45K which is 75% of $60K.
The balance can be carried forward and claimed on her return on any one of the next five years.
Federal and Provincial Tax credits on the $45K attributable donation equals the following:
Federal 15%
Provincial 5.05%
Total: 20.05% of $200= $40.10
Federal 29%
Provincial 11.16%
Total: 40.16% of $44,800 = $17,991.68
Total Federal and Provincial Tax Credits on $45K charitable donation = $18,031.78
Did you know?
- All charitable donations can be claimed in the current taxation year or can be carried forward and used in any of the subsequent five years.
- In the year a taxpayer dies, charitable donations may be claimed up to a limit of 100% of the taxpayer’s net income on their terminal return or carried back one year.
- Charitable Donations can also be made in kind with gifts of stocks, bonds, land, buildings, and cultural art of historic value.
- Most often all realized gains are tax exempt and charitable donation tax credits can be used according to eligible time and parameters.
This article has been prepared by Domenic Colussi, Certified Financial Planner and Chartered Life Underwriter. Domenic provides financial and estate planning as an associated Financial Planner with ASSOCIUM. If you have any questions regarding these individual financial plans or have clients who need assistance, do not hesitate to get in touch through your ASSOCIUM Account Executive.
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