How giving this season can bring you tax returns

Not sure what to get certain people on your list? Skip the malls and donate to a cause that’s close to their hearts. You’ll not only support something they are passionate about, but you’ll also receive tax advantages.

Tax benefits of charitable donations

When you combine all of your donation receipts at tax time, you’ll get non-refundable charitable donation tax credits that you can use to reduce both your federal and provincial income taxes. Other benefits can add up to significant savings:

  • There is a first-time donor’s super credit available, which offers an incentive for people to donate if they have not done so before.
  • If you and your spouse share the same account for making the donation, it’s easier to claim the donations on one return. You can give up to $200 to receive the credit at the lowest tax rate. Donations higher than $200 have the credit calculated at a higher rate.
  • If you don’t have income or income tax owing, you won’t be able to use the tax credit. However, you can carry it forward for five years.

To find out if the charity you are donating to is eligible for the donation tax credit, visit the Canada Revenue Agency’s list of registered charities.

Save capital gains by donating shares and stocks

There are also tax benefits for donating publicly traded shares and stock options. When you dispose of shares, you are usually taxed at the capital gains rate. For example, if you purchased shares for $80 and sold them for $100, you have a capital gain of $20 and pay tax on 50% of that, or $10. But if you donate these shares to a charity, there may be an inclusion rate of 0% if you did not receive an advantage for the gift. It may be better to donate the securities themselves than to sell them and donate the cash to avoid paying the tax on the capital gain.

Check when you give

There are a couple of things to keep in mind when you donate:

  • Some charities need a minimum donation before they can give you receipt. Some will only issue receipts for donations over $25, while others may issue receipts for donations less than $10. Check their websites or speak to someone at the charity.
  • While you can make a donation in someone’s name, you can’t transfer the tax receipt to them so they can claim it on their tax return.