Maximizing Canadian Charitable Donation Tax Credits

Federal Tax Credit Calculation for Charitable Donations

The first $200 of a donation qualifies for a 15% federal tax credit.

Amounts exceeding $200 are eligible for a higher rate: 29%, or up to 33% for individuals in the highest income bracket.

The limit for claiming donations is typically 75% of net income but increases to 100% in the year of death and the year preceding death.

Types of Charitable Donations (ITA 118.1)

The Income Tax Act (ITA) 118.1 defines various types of eligible charitable gifts:

• Total Charitable Gifts: Eligible amounts donated to registered charities, Canadian amateur athletic associations, municipalities, the United Nations or its agencies, universities outside Canada that enroll Canadian students, and charitable organizations outside Canada that have received a gift from Her Majesty in the current or preceding year.
• Total Crown Gifts: Gifts made to the Crown (federal or provincial governments).
• Cultural Gifts: Gifts of certified cultural property.
• Ecological Gifts: Gifts of ecologically sensitive land or easements.

Each of these categories has specific criteria for eligibility.

Donation Tax Credit Calculation Example

An individual with a net income of $300,000 donating $210,000 would calculate their federal tax credit by applying the appropriate rates to the first $200 and the remaining donation amount, while considering the 75% net income limit.

Eligible Gift Amount (ITA 248(31))

The eligible amount of a gift or monetary contribution, as defined by ITA 248(31), is the fair market value (FMV) of the gift minus any advantage received by the taxpayer related to the gift.

Gifts of Capital Property

For gifts where the FMV exceeds the adjusted cost base (ACB) or undepreciated capital cost (UCC), taxpayers can elect any amount between FMV and ACB/UCC for the purpose of determining the credit.

Special rules apply to gifts of publicly traded securities and ecologically sensitive land, including the capital gain being deemed nil.

Claim Limits & Carry Forward Provisions

The limit on the amount claimed is 75% of net income, with exceptions allowing 100% in the year of death and the preceding year.

Unused donations can be carried forward for 5 years, or 10 years for ecological gifts.

2023 Federal Budget Proposals for Donations

• Introduction of a 60% provincial charitable donation tax credit on the first $200 of contributions in Alberta.
• Conditions for receiving a charitable donation credit for gifting non-qualifying securities (NQS), including the disposition of the security within 60 months.

Timing of Consideration for Non-Qualifying Securities

The Tax Court of Canada's ruling addresses the timing of consideration received for the purpose of calculating the value of a gift of an NQS.