When donations are made to registered charities, copies of the receipts must accompany personal tax returns. Corporations are required to list any donations with the charity registration number.

The Charity Tax Credit is based on 17% of the first $250 and 29% of the balance up to 20% of net income.

A charitable donation is a tax deduction, which again is different from the above tax credit in that you reduce your income by the amount of the donation up to a maximum of 75% of your net income. This same percentage also applies to Crown and Crown foundations.

It is important to note that you get both your tax deduction and your tax credit. Of course, you would have to have a significant income to justify giving up to 75% of your net income to a charity.

You can get a charitable deduction for your time donated to a registered charity. The way this works is you have to get a receipt for “professional services rendered.” To be sure you get this charitable receipt, demand that you have it before you provide the service. It’s a lot easier to get a receipt before you start, than after the work is performed. You don’t have to be a professional, as long as professionals normally do the service you provided. You can send the charity an invoice and then write it off as a charitable donation. The limit on this is 20% of your income.

The charitable donations tax credit is calculated at the highest marginal tax rate for gifts in excess of $200 as an incentive for larger donations.

Charitable donations which exceed $200 per year are eligible for a special 29% federal tax credit, whereas the first $200 of charitable donations are eligible only for a 17% credit. The maximum you can claim in any one year is 20% of your net income.

To make the most of your charitable donations, consider the following:

1. Lump your charitable donations into one calendar year in order to surpass the $200 threshold.

2. One spouse should claim the other spouse’s charitable donations, if this will allow the claiming spouse to surpass the $200 threshold.

3. If you are below the $200 threshold one year, consider saving your claims until next year, if the combined donations of both years will exceed the $200 threshold.

4. Claim your oldest unclaimed donations first. You do not have to claim the full amount of any year’s donations in that particular year, as any unused donations may be carried forward up to five years.

5. If you live in Canada but work across the border, you may claim donations to American charitable organizations provided they do not exceed 20% of your U.S. income.

6. You may also claim donations other than cash. Refer to these CRA publications for details:

1T-288, Gifts of Tangible Capital Properties to Charity and Others.
1T-297R, Gifts in Kind to Charity and Others.
1T-244R2, Gifts of Life Insurance Policies as Charitable.

Note: For Charitable Donations, official receipts are required for all donations except those shown on your T4 Information slips. Cancelled cheques and photocopies are not acceptable proof of payment (See CRA Interpretation Bulletin IT-110R2, Deductible Gifts and Official Donation Receipts).