Giving And Getting: How To Make The Most Out Of Canada's Donation Tax Credit

Giving And Getting: How To Make The Most Out Of Canada's Donation Tax Credit

As a Canadian, I feel very fortunate living in a stable and wealthy country. I know that sharing what I make can help make positive changes both at home and abroad.

These intentions are good, but at the end of the year, there’s not a lot of cash left over in the kitty.

We plan, budget, buy on sale, scrimp, save for a rainy day (sometimes raiding this to keep moving forward)...yet at the end of it all, we're still looking at each other kinda puzzled (where did it all go?!) when we tally up our annual expenses.

But there's something to be said about thinking of others within this equation.

Even with rising inflation, our family decides on something to support each year, something we believe in.

Each time we do, it's within the realm of our annual earnings. This can max out somewhere around 2% - 2.25% of our income.

And believe it or not, spending this little bit on others can actually help you save money.

How can donating to charity help me save money?

It may not be a direct saving that you can pocket instantly, but when you really think about what you support and how it impacts your community, both locally and globally, it's a net gain for you – and everyone else.

Some say philanthropy saves society from spending more tax dollars on those who are in need by taking the burden off of the taxpaying base. Those who can donate to charity make it so those who can't, don't have to.

But there’s also a tax benefit. Everyone who pays taxes can benefit by giving, depending on how much you give.

Federal and provincial tax credits for charitable donations

Here’s a graph of how much you can claim federally and provincially on your charitable donations.

Canada/Province/Territory Rates for first $200 of donations Rates for rest of the total donations
Canada (Federal) 15.00% 29.00%
Alberta 10.00% 21.00%
British Columbia 5.06% 14.70%
Manitoba 10.80% 17.40%
New Brunswick 9.68% 17.95%
Newfoundland and Labrador 8.70% 18.30%
Nova Scotia 8.79% 21.00%
Northwest Territories 5.90% 14.05%
Nunavut 4.00% 11.50%
Ontario 5.05% 11.16%
Prince Edward Island 9.80% 16.70%
Quebec 20.00% 24.00%
Saskatchewan 11.00% 15.00%
Yukon 6.40% 12.80%

The amount you get for charitable donations is in non-refundable tax credits, which means you can only use them to reduce the amount of taxes you owe. If you don't owe any taxes, you can't cash out on your tax credits.

The maximum amount you can claim is 75% of your income.

Let's look at an example to get a better idea of how much you can get.

Example of a donation tax credit

Say you live in Ontario and give $1,000 to charity over the course of a year.

You'll get a tax credit from both Canada as a whole and from your province.

Your federal tax credit will be 15% of the first $200 and 29% of the remaining $800:

(15% x $200) + (29% x $800) = $30 + $232 = $262 federal tax credit

Since you're in Ontario, your provincial tax credit will be 5.05% of the first $200 and 11.16% on the rest:

(5.05% x $200) + (11.16% x $800) = $10.10 + $89.28 = $99.38 provincial tax credit

Together, you'd get $361.38 total in tax credit for that year. Of course, this is just the bonus on top of helping out the charities you love.

Please note: These calculations assume your annual taxable income is under a certain amount (it was $202,800 in 2017). If you make more than this, your rate for any donation above the first $200 changes. More info here.

So how do donation tax credits work?

Of course, there are some rules to follow with the charitable donation tax credit.

First things first, you must be donating money to a recognized CRA charity.

An important first step when thinking about being generous is to make sure the people you're giving money to are legit. They also need to be able to issue official donation receipts so you can claim it on your taxes.

Next, your donation must be defined as a gift and there should be no strings attached to it. You can’t ask for a favour later or benefit from your gift in anyway (other than feeling good about it, of course).

If you do receive something of value in return – tickets to an event, for example – it must be deducted from your initial donation and only the difference can be claimed.

Some tips to make the most out of your donations

It seems like there's quite an advantage to giving more than $200 to charity because of the increased donation rate.

If this isn’t something you can do annually, but you still want to give something, consider keeping your charitable receipts until you reach over that amount. You can claim previous years receipts by accumulating them and claiming on the same year.

Anything that’s within the past 5 years is fair game. If married, then also consider combining your receipts with your spouse's and claim them on a single tax return.

But what's the best charity to donate to?

Now that's a loaded question…but chances are, if you’re just starting to think about philanthropy, then it’s hard to know where to start.

I suggest thinking about what's important to you and then finding a trustworthy charity that helps that cause.

Registered charities in Canada

The Canadian Revenue Agency (people who deal with your taxes) maintain a list of charities that are registered with them. This registration makes the charity more trustworthy, as you know the CRA has looked into them and that they pay their taxes.

But there's more than just tax payments that I'm worried about when deciding on a charity. For extra clarity on where exactly my money goes, I typically turn to Charity Intelligence Canada.

It’s not a be-all end-all when deciding who to give to, but when I stumbled on this website I did breathe a sigh of relief. They essentially do all the work for you when it comes to the big questions.

Some of those big questions are:

  • How much of my money goes to the cause?
  • How much of it goes to running the charity?
  • How transparent is the charity with their money?
  • Do they file their taxes each year?

The other great thing Charity Intelligence does is publish a top 10 most impactful charities of the year. These include charities across Canada with both a local and international scope.

Some examples of impactful CRA charities

No matter what your cause of choice is, you're likely to find a charity that helps it. Here are a couple examples, but consider doing your own research to make sure everything aligns with your personal values.

And again, always double check to make sure they're recognized by the CRA.

Note: All of the following charities are named in Charity Intelligence's top 100 charities list and are recognized by the CRA.

Children's charity

Aunt Leah's Place is a recognized charity that focuses on helping children in foster care get the attention and life skills that they often miss out on.

According to Charity Intelligence, about $0.75 of each dollar spent goes directly towards the programs they manage. They've been named one of the most impactful charities of 2018.

Only 20-40% of youths in foster care graduate high school, compared to the 80% average graduation rate in Canada. Of the students supported by Aunt Leah's Place, 64% have graduated high school, an increase of at least 24%.

Click here for more information.

Animal charity

If you're an animal lover, you may want to consider a charity that helps protect our furry friends.

A top example is World Animal Protection, a registered charity that also averages a rate of $0.75 per dollar going directly towards protection programs.

This is a global program, with focuses in Africa, Asia, Europe, Latin America, and North America. Their impact has been strong and varied since their inception in 1980, including giving life-saving care to 50,000 animals affected by Hurricane Irma in 2017.

More information can be found here.

Cancer charity

There are lots of charities for specific types of cancer, and people tend to donate to those that have affected them or a loved one personally.

One example is the Brain Tumour Foundation Of Canada, a registered charity founded in 1982 that funds programs to support people affected by brain tumours, as well as researchers who look into potential cures and treatments. Again, they average about a $0.75 per dollar going directly to their cause.

In 2017, a researcher funded by the charity identified an inhibitor that increased viral infection.

Find out more about BTFC here.

Mental health charity

Distress Centres Of Toronto offers a 24/7 helpline for crisis intervention, emotional support, and suicide prevention. They offer counselling services over the phone, through text, and in person. $0.76 of each donation goes directly to funding their programs.

In 2017, Distress Centres of Toronto had 104,388 interactions with people in need. 92% of callers that contacted their 408-HELP line experienced positive outcomes.

Here's some more info.

My personal favourite charities

If you're the type of person who prefers anecdotal suggestions, I have a few for you.

Over the last few years, my family's giving has been focused on charities that have both a local and national impact.

Juvenile Diabetes Research Foundation Canada (JDRF)

I was surprised to read and hear stories from young people living with Type 1 diabetes and how it impacts parents and children under the age of 14.

On average, only 32 cents goes directly toward the cause (trending upward in recent years) but they're financially transparent and currently have a definite need for funding.

Our small donation impacts kids of all backgrounds and works on both a national and local level, which we like.

Canadian Mental Health Association (CMHA)

Mental health has been a hot topic lately with increased resources needed to meet rising demand. CMHA gives 62 cents per dollar toward their cause.

United Way Winnipeg

They donate 79 cents for every dollar made and impacts over 250,000 people locally through frontline organizations.

Other ways to give

There are more than just charities that need funding, and you don't always have to donate money. You have other options.

Volunteering your time

If you don't have the extra funds to give to charities, you can also volunteer. In fact, giving your time is one of the single greatest things anyone can give to an organization.

You can’t claim your time, but the same effect of giving and the feeling of contributing to a cause that creates positive change can make you feel good.

Supporting political campaigns

Another way to give or make positive change is through supporting political campaigns.

This isn’t for everyone, but it does deserve to be mentioned as we are all impacted by government. And if you support a local politician who you know represents your vote in a meaningful way, you’re more likely to engage in democracy.

Read more about political donations here.

What about you?

Do you give to charity or making political donations or give donations of your time?

Do you feel it’s a waste of your resources? Or is it something you look forward to doing each year?

Disclosure: Some links in this article may be affiliate links. We're letting you know because it's the right thing to do. Here’s a more detailed disclosure on how HTS makes money.

Editorial Disclaimer: The content here reflects the author's opinion alone, and is not endorsed or sponsored by a bank, credit card issuer, rewards program or other entity.

Hot Credit Card Deals This Month:

Post new comment