Compassion and values are the primary drivers of why Canadians collectively donate several billions of dollars to charity every year, according to Statistics Canada. Tax benefits don’t seem to be what compel most people to contribute to a worthy cause.
However, there’s no downside to claiming charitable tax credits when you file your income tax return: it’s easy and valuable. It doesn’t cost the charity anything, in fact the opposite can be true — these credits can be reinvested to help your chosen charity even more.
This article explores the value of charitable tax credits, explains how to claim them, and suggests how impact-minded donors might want to think about them.
Here’s what you need to know about charitable tax credits:
- In most cases, your tax credits will be worth between 20% and 49% of the amount you donated (try out our tax credit calculator). It’s well worth your time to claim these non-refundable tax credits.
- Only donations to qualified donees in Canada are eligible. The organization needs to issue you an official donation receipt. All donations made through RC Forward are eligible.
- All donation amounts are eligible for charitable tax credits, but you’ll unlock significantly higher tax credit rates for any portion of your donation that exceeds $200.
- By estimating in advance the value of their charitable tax credits, donors looking to optimize for impact can incorporate the tax credits into their donation planning.
Can I claim charitable tax credits for any charitable donation?
No, not all donations are eligible for Canadian charitable tax credits. To ensure that you can unlock these credits, keep two things in mind whenever you’re making a donation:
- Only donations made to a “qualified donee” are eligible for charitable tax credits. Typically, but not always, a qualified donee is a charity or nonprofit organization registered with the Canada Revenue Agency (CRA). The Government of Canada maintains a list of the types of organizations that it currently recognizes as qualified donees.
- Your donation to a qualified donee is only eligible for charitable tax credits if you’re issued an official donation receipt. Although the organization should automatically issue you this receipt, it’s up to you to ensure you receive it.
Unfortunately, most global charities are not registered with the CRA and as such you will be unable to claim tax benefits if you donate directly to the charity. However, you can solve this problem by donating through RC Forward. RC Forward enables Canadian donors to donate to international charities and receive a valid tax receipt. You can make a donation easily with your credit card on the RC Forward website and the tax receipt will be sent immediately to your email inbox.
RC Forward was created to support any Canadian seeking to have an extraordinary impact by donating to charities that are evaluated as being extremely effective, recognized for the work they do that is rigorous, transparent, evidence-based, and cost-effective. Our donation platform helps bridge the gap between high-impact giving and tax benefits for Canadians.
How much do I get in charitable tax credits? Is a $100 donation worth $100 in credits?
Valuable as these tax credits are, there isn’t a 1:1 correlation between the amount you donate and the tax credits’ value. Charitable tax credits are typically worth between 20% and 49% of the amount you donate.
The value you’ll receive depends on which province you reside in because there’s a federal and a provincial component to these tax credits. The amount you donate, your income, and how you claim the credits will also affect their value.
To quickly estimate the value of your donation’s charitable tax credits, you can use this tax credit calculator.
Here’s more information about how the total value of your charitable tax credits is determined, and why the amount you donate and claim matters:
- If you claim $200 or less in eligible donations, the tax credit rate will be the total of two components:
- You’ll receive a federal rate of 15% of the donation amount.
- You’ll receive a provincial rate of between 5% and 20% of the donation amount.
- This means on eligible donations up to $200, your total tax credit rate will be between 20% and 35% of the donation amount.
- You’ll unlock significantly higher tax credit rates for donations above a $200 minimum. For example, if you claim $500 in eligible donations, $200 of this will be assessed at the above rates, and $300 of this will access higher rates:
- You’ll receive a federal rate of 29% on this $300.
- You’ll receive a provincial rate of between 11% and 24% on this $300.
- This means the total tax credit rate on this $300 would be between 40% and 53%.
- The larger the amount by which your donation exceeds $200, the higher your overall tax credit will be.
Charitable tax credits are non-refundable tax credits, which means they can only be used to reduce the amount of taxes you pay. Unlike refundable tax credits such as the GST/HST credit, non-refundable credits can’t be used to get a tax refund.
To make the best of your non-refundable credits, see our tips under “How can I maximize the value of my charitable tax credits?”
What if I’m just making a small donation?
Each person faces unique circumstances that affect how much they’re able and willing to donate. One great thing about effective giving is that it empowers many people to have more of a positive impact than they thought possible. And, one great thing about Canadian charitable tax credits is that they apply to donations of any amount.
There are significant tax benefits to claiming more than $200 in eligible donations on your tax return. That said, eligible donations less than $200 still access valuable tax benefits, typically amounting to between 20% and 35% of the amount you donated.
How do I actually claim charitable tax credits?
You have all the official donation receipts for the donations you wish to claim. You haven’t claimed these donations on a previous return. You’re preparing to file your taxes. Now what?
What you’re working towards is a dollar amount to enter on Line 34900 (formerly Line 349) of your income tax and benefits return. This amount is the total amount of qualifying donations you wish to claim on the return you’re filing. For example, if you wish to claim two eligible donations that are each worth $350, you’ll enter $700 on Line 34900.
If you’re filing online, your tax software is likely set up to help you. For example, if you’re using SimpleTax, you just add the “Donations and Gifts” section to your return, and fill in the information as prompted. SimpleTax has a collection of brief articles on charitable tax credits.
If you’re filing on paper, you’ll need to complete Schedule 9, “Donations and Gifts,” and attach it to your return. Schedule 9 helps you determine the amount that you’ll enter on Line 34900.
Even though you’re just entering the total amount, make sure you have an itemized list of each donation that contributed to this total amount, as well as all official donation receipts, in case the CRA asks to see them this year or in the future.
How can I maximize the value of my charitable tax credits?
Optimizing can make a big difference in the value of the tax credits your donations unlock, and it just takes a little information and planning. Here’s some tips to help optimize your charitable tax credit rate:
- If you have a spouse or common-law partner, it may make sense to pool all of your eligible donations into one tax return. This may help more of your pooled donations unlock higher tax credit rates above the $200 minimum threshold.
- Consider claiming multiple years of donations on one tax return. You can save your official donation receipts and claim these donations for up to five years after you donated. The $200 minimum for the higher federal and provincial tax credit rates is an annual minimum.
- Altruistic students, take note: maybe it’s best to save those donation receipts (you can save them for up to five years). If you apply for charitable tax credits in a year when the amount of tax you owe is less than the value of your credits, or you’re owed money (a tax refund), your credits will have less or no value because they’re “non-refundable” tax credits.
Does claiming charitable tax credits have an effect on the charity?
Given how valuable charitable tax credits are, it’s understandable to wonder if claiming them somehow takes money from the charity. But actually, charitable tax credits exist to encourage Canadians to give to charities — if tax credits make your giving experience more positive, cost effective, and valuable for you, all the better for the charities you support.
However, for donors seeking to maximize their positive impact, charitable tax credits can be added to your original donation to help your chosen charity even more.
Let’s say you claim $1,000 of eligible donations on your 2021 tax return, and your charitable tax credit rate on this $1,000 ends up being 40%. Your tax circumstances mean that you can use all of this, and you end up with a non-refundable tax credit worth $400.
Here are four possible perspectives to take with this situation:
- You’ve achieved $1,000 worth of impact by spending only $600.
- You’ve made your tax burden $400 cheaper.
- You planned to donate a net amount of $1,000 to charity this year. You realize you can now donate a total of $1,400 for a net cost of only $1,000.
- You like all of these reasons, so you decide to put some of the tax credit value towards reducing your tax burden, and some of it towards maximizing your positive impact.
Even if you decide to view charitable tax credits as a way to have more impact, it can be challenging to act on this when it might be months or even years before you claim your eligible donations. Here are two ways to make this easier:
- Estimate in advance how much your charitable tax credits will be worth (our tax credit calculator can help with this).
- Consider donating an amount upfront that reflects the anticipated value of your tax credits, rather than waiting to first claim the tax credits and then to donate their value.
Regardless of your personal perspective on charitable tax credits and how to use them, the RC Forward team is excited to support you in your effective giving goals. Since 2017, Canadian donors have collectively given over five million dollars to high-impact charities through RC Forward.
Tax credits aren’t the most exciting thing in the world, but claiming and optimizing them is one way to ensure your effective giving is, well, as effective as possible.
What drives RC Forward is a belief that everyone should have the chance to contribute to solving some of the world’s most pressing problems. You can have an extraordinarily positive impact through effective giving.
If you want to support an international charity, consider donating through RC Forward to ensure you can claim tax benefits on the donation. You can see the list of our partner charities here.