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Charitable Donation Tax Credit

If you make a charitable donation to a Canadian registered charity or other qualified donee, you may be entitled to the charitable donation tax credit [1].

The basic federal tax credit for donations to a registered Canadian charity 15% of the first $200 donated and 29% on amounts over $200. All provinces have similar tax credits for charitable donations.

Provincial tax credits for charitable donations work in much the same way with the lowest tax bracket applied to the initial $200 and the highest tax rate to amounts over $200.

You may claim up to 75% of your net income and any unused amounts over the 75% limit may be carried forward five years. In the year of death, 100% of the donation amount may be claimed.

What Qualifies As A Charitable Donation?

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Donations or gifts to charities include cash, securities of listed public companies, life insurance policies, residual interest in trusts, ecologically sensitive land, and Canadian cultural property.

Donations of Securities

The charitable donation of certain capital property such as listed public securities, ecologically sensitive land, and bonds are not subject to the tax on the capital gain when donated after May 2, 2006.

Securities that qualify for this treatment include stocks listed on a designated stock exchange, bonds or debt of companies listed on a designated stock exchange and mutual funds. As a general rule if the stock, bond or mutual fund qualifies to be held in a RRSP or RRIF, it qualifies for the zero capital gain on the donation.

The Value & Any Benefits

When you make a donation and receive nothing in return, you have made a true gift. However, when the property given has no identifiable value or if you have received something in return (such as a round of golf, or ticket to a sporting event), the valuation of the donation becomes more complicated.

Draft legislation has been proposed that would allow for a gift at fair market value to be made, but if any advantage were received in return (such as a round of golf, or ticket to a sporting event), the fair market value of the “advantage” would be used to reduce the donation amount.

Family Charitable Donations

If you and (or) your spouse have made charitable donations, you are permitted to combine them and claim them on one return. This is particularly beneficial when your individual donations are under $200 but combined they exceed $200.

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