Charitable Donation Tax Credit Guide

How the Credit Is Calculated

Federal Credit Rates

• First $200: 15% credit rate
• Over $200: 29% credit rate
• Over $200 (top bracket): 33% if taxable income exceeds $246,752

Provincial Credits

Each province adds its own donation tax credit on top of the federal credit. Combined federal and provincial credits typically return 40-50% of donations over $200.

Example Calculation

If you donate $1,000 in Ontario:

• First $200 × 15% federal = $30
• Next $800 × 29% federal = $232
• First $200 × 5.05% Ontario = $10.10
• Next $800 × 11.16% Ontario = $89.28
• Total credit: ~$361 (36% effective rate)

Who Can Issue Tax Receipts

Only registered charities can issue official donation receipts. Verify charity status:

• CRA Charities Listing: Search the CRA website to confirm registration
• Registration number: Must appear on the receipt
• Qualified donees: Include registered charities, amateur athletic associations, and certain government bodies

What Qualifies as a Donation

Cash Donations

• Money given with no expectation of goods or services in return
• Pre-authorized monthly donations
• One-time contributions

Gifts in Kind

• Publicly traded securities (stocks, bonds, mutual funds)
• Art, antiques, and collectibles
• Real estate
• Certified cultural property

What Doesn't Qualify

• Volunteer time or services
• Lottery or raffle ticket purchases
• Membership fees that provide benefits
• Event tickets where you receive value
• Amount above fair market value of goods received

Donating Securities: Zero Capital Gains

One of the best tax planning strategies: Donate publicly traded securities directly to charity.

Benefits

• No capital gains tax: Completely exempt when donated directly
• Full fair market value receipt: Receive tax receipt for current value
• Double benefit: Avoid gains tax + get donation credit

Example

You own shares worth $10,000 (cost $3,000):

• If sold then donated cash: Pay tax on $7,000 gain (~$1,750), donate $10,000, credit ~$4,000
• If donated directly: No gains tax, donate $10,000, credit ~$4,000
• Tax savings: Additional $1,750 by donating directly

Donation Limits

• Annual limit: 75% of net income
• Carry forward: Unused donations can be carried forward 5 years
• Capital property donations: May have higher limits in year of donation
• Death year: Limit increases to 100% of net income

Pooling Donations Between Spouses

Either spouse can claim all family donations to maximize the credit:

• One spouse claims all donations over $200 threshold
• Usually most beneficial for higher-income spouse
• Ensures the full amount above $200 gets 29%+ rate

Split Receipting

When you receive something in exchange for your donation (like a gala dinner), only the portion exceeding the value received is eligible:

• Donation: $200 for charity dinner
• Value of dinner: $75
• Eligible donation: $125

The charity must indicate this on your receipt.

Required Receipt Information

Official donation receipts must include:

• Charity's name and address
• Charity's registration number
• Receipt serial number
• Date donation received
• Donor's name and address
• Eligible amount of donation
• Description and fair market value of gifts in kind

Claiming Strategies

Bundle Small Donations

If you make small donations throughout the year, make sure the total exceeds $200 to benefit from the higher rate on amounts above the threshold.

Carry Forward If Needed

If your income is low this year but expected to increase, carry donations forward to a higher-income year for a bigger credit.

Year-End Planning

Donations must be made by December 31 to claim on that year's return. Plan larger donations strategically.

Donate Appreciated Securities

Always donate appreciated stocks directly rather than selling and donating cash.

Political Contributions vs. Charitable Donations

Political contributions to registered federal parties have their own credit (separate from charitable donations):

• First $400: 75% credit
• $400-$750: 50% credit
• $750-$1,275: 33.33% credit
• Maximum credit: $650

Common Mistakes to Avoid

• Missing receipts: Keep all official donation receipts
• Claiming unregistered charities: Verify registration status
• Not pooling spousal donations: One spouse should claim all
• Selling securities then donating: Donate directly to avoid capital gains
• Missing the $200 threshold: Higher rate only applies above $200

Documentation Requirements

Keep for 6 years:

• Official donation receipts from registered charities
• Appraisals for gifts in kind over $1,000
• Broker statements for securities donations
• Any correspondence about large or complex donations