Charitable giving can help your tax bill

TORONTO — The last few weeks of the year are the busiest for Canadian charities with people who rush to get in their last-minute donations before the Dec. 31 deadline.

More than 24 million Canadians gave away a total of $12.8 billion to charities in 2013, with the average gift per donor being $531, according to the most recent data from Statistics Canada.

Imagine Canada, a charitable organization that provides support to nonprofits, estimates 40 per cent, or $5 billion, in donations come in the last six weeks of the year.

“There is a groundswell that happens when we enter this time,” said Bruce MacDonald, president and CEO. “Really, this whole season invites people to think of others.”

The group, whose members include the United Way and smaller community foundations, said people are driven to donate for a number of reasons, but the most common is having a personal connection to a cause.

“Whether they themselves, a friend or a family member has benefited from the work of a charitable organization, that (motivation) is really something you can’t replace,” he said.

Although the intent behind charitable giving is often altruistic, there can also be a financial pay off.

Under tax laws, Canadians can claim federal and provincial tax credits for donations of up to 75 per cent of their annual income made to any charity registered with the Canada Revenue Agency.

Donations claimed on a tax return must be made on or before Dec. 31 of the same calendar year to qualify, although credits can be deferred for up to five years.

A federal credit of 15 per cent can be claimed for the first $200 of donations and a credit of 29 per cent can be claimed for any remainder of funds.

Donations are also eligible for provincial tax credits, which range from 5.05 per cent to 20 per cent.

The credits can only be used to subtract any amount of owed tax. Credits can also be shared between spouses and can be advantageous if one spouse is in a higher income bracket than the other.

Brenda Lee-Kennedy, a partner in taxation at accounting firm PwC, said it can also be beneficial for individuals to defer tax credits if they anticipate having more taxable income in the near future.

Credits can also be claimed for donations that are not cash.

The advantage in donating shares directly to a charity instead of selling them and giving the cash is that you avoid the tax on any capital gains.

Lee-Kennedy says the savings can add up, especially if the shares you are donating are worth significantly more than you paid for them.

Whether the decision to give is financial or philanthropic, MacDonald says Canadians should try to make charitable giving a part of their annual financial plan, whether it be monthly or lump sum donations.