10 Tips on Claiming Charitable Donations

By Nicola Elkins, CEO/Founder, BenefAction

1. Gift to a registered charitable organization.

If you want to claim a charitable contribution, you must have made a donation during the tax year to a registered charitable organization or other qualified donee, and submit a valid donation receipt with your tax return.

2. Determine which spouse should claim the donation.

Gifts may be claimed either by the person who made the gift, or by the spouse or common-law partner of the person who made the gift. Calculate the claim on Schedule 9 Donations and Gifts, and add the amount to the non-refundable credits on Schedule 1 Federal Tax, line 349.

3. Know your limits.

The maximum that may be claimed is 75% of an individual’s net income for the year. Net income is used to calculate certain federal and provincial or territorial non-refundable tax credits. Net income includes income from all sources: employment, pension, interest, dividends, capital gains and business LESS certain deductions like RRSP contributions, carrying charges and employment expenses.

4. Carry forward.

Donations exceeding your annual donation claim limit can be carried forward and claimed in any of the five subsequent years.

5. Determine the eligible amount you can claim.

If you receive a benefit of some kind in return for your donation that exceeds $75 or 10% of the gift value, you can only deduct the eligible amount. The eligible amount is the fair market value of the gift minus any advantage (benefit) gained by the taxpayer as a result of the gift. Examples of advantage you may receive in return for your contribution include merchandise, tickets to an event or other goods and services. If the advantage exceeds 80% of the gift value, then the eligible amount of the gift will be nil.

6. Donate appreciated securities instead of cash.

Donations of publicly listed securities are generally receipted at fair market value on the date of the donation. The entire value is eligible for a deduction. In addition to the tax credit, NO tax on any capital gain applies to gifts of publicly-listed securities given to charities. The disposition is entered on Form T1170 Capital Gains on Gifts of Certain Capital Property.

7. Ensure Cultural and Eco-Gifts are properly certified.

Cultural gifts and ecological gifts must be certified as such to be eligible for the credit. The key thing to remember with cultural gifts is that the receiving institution must already be designated to receive the property before the tax incentives apply. Designation is granted by the Canadian Cultural Property Export Review Board. Eco-Gifts must be approved and certified by the Minister of the Environment under the Canadian Ecological Gift Program.

8. Consider benefits of gifting Real Estate.

In addition to the normal gifting limits (e.g., 75% of net income per annum and five-year carry- forward provision), gifts of capital property (e.g., Real Estate) get the additional benefits of having an amount added to the annual contribution limit of 75% of net income. The additional amount equals 25% of the taxable gain arising from the gift, and/or 25% of the recaptured CCA. This “bump-up” in the donor’s contribution limit permits more credits being claimed in the year of the gift.

9. Donating Flow-Through Shares.

The 2011 budget eliminated part of the tax benefit that existed where a Canadian taxpayer buys a Flow-Through Share then donates it to charity. The taxpayer continues to benefit from the deduction for the eligible exploration expenses flowed through from the corporation and the charitable donation tax credit, but is now going to be taxed on the capital gain equal to the lesser of the FMV and the original cost of the shares. Despite the new rule, donating Flow-Through Shares is still a tax effective way to make a donation.

10. Company’s that donate can receive a deduction.

Company donations are treated as tax deductions whereas individual and trust donations are treated as tax credits. A deduction reduces taxable income for companies and the limits for the deduction are the same as above for individuals.

Source: The Knowledge Bureau, PDGC Network.

Prior to starting BenefAction in 2008, Nicola Elkins spent 20 years in the financial services industry holding a number of senior roles. She holds a M.Sc. in Economics from the London School of Economics, a B.A. from McGill University, and is a graduate of the Advanced Canadian Gift Planning Course offered by the CAGP. She is also the author of “Master Your Philanthropy” and creator/facilitator of an online course called Investment Strategies in Charitable Giving.

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These articles are for general informational purposes only. Please obtain professional advice before taking any action based on this information. No endorsement or approval of any third parties or their advice, information, products or services should be implied by any references to third parties contained in any article. Trademarks cited in these articles are the respective properties of their owners.

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