Donating to Charities 101

Registered charities in Canada perform valuable work in communities, and Canadians support this work in many ways. The Canada Revenue Agency (CRA) regulates registered charities under the Income Tax Act and is committed to providing donors with relevant information. The following information has been provided by Canada Revenue to assist Canadians with their charitable plans:

A registered charity is a charitable organization, public foundation, or private foundation that was established in Canada and is resident in Canada. It is operated exclusively for charitable purposes and must devote its resources to charitable activities. A registered charity has received a registration number from the Canada Revenue Agency and is exempt from paying tax on its revenue. It can issue donation receipts for income tax purposes for gifts that it receives.

To verify that a charity is registered, ask the charity for its registration number, and confirm its status by consulting the CRA Charities Listings, at the Canada Revenue Agency (see contact info. below).

Registered charities must fit into one of four categories of charitable purposes: the relief of poverty, the advancement of education, the advancement of religion, or other purposes that benefit the community in a way the courts have said are charitable.

Non-profit organizations may not fit into one of the four categories of charitable purposes but may have purposes such as social welfare, civic improvement, and pleasure or recreation. Non-profit organizations cannot issue donation receipts for gifts that they receive.

Registered charities are not required to issue a donation receipt, but, if they do, the donation receipt can only be issued to the true donor of the gift to a charity. If a donation is made by a cheque in both spousal names, a receipt can be issued in either name.

For a donation to be eligible to reduce income taxes, ownership of property (cash or gifts in kind such as goods, land, or securities) must be transferred to a registered charity or qualified charity and the transfer has to be voluntary. These donations could consist of: money, securities, ecologically sensitive land, certified cultural property, capital property, personal-use property (such as prints, etchings, drawings, paintings, sculptures, jewelry, rare folios, rare manuscripts, rare books, stamps, and coins), and inventory (such as art, antiques, or rare books). Gifts of services are not considered property and do not qualify for a tax receipt.

If a registered charity provides the donor with an item of value in return for the donation, the eligible amount for income tax purposes is generally reduced. This amount should be reflected on the receipt. For example: Fred donates $1,000 to the Anytown Ballet Company, which is a registered charity. In gratitude, the company provides him with three ballet tickets worth $50 each, for a total value of $150. These tickets are considered an advantage of $150. The eligible amount of Fred's donation for calculating his tax credit is therefore $850 ($1,000 - $150).

Any donations not claimed in the current year can be carried forward and claimed on a return for any of the next five years, but they can only be claimed once. Tax credits for gifts carried forward from a previous year must be claimed before tax credits for gifts in the current year. For those claiming a carry forward, attach a note to the return indicating the year of the return in which the receipt was submitted, the portion of the eligible amount to be claimed this year, and the amount that will be carried forward.

The first $200 donated is eligible for a federal tax credit of 15 per cent of the donation amount. After the first $200, the federal tax credit increases to 29 per cent of the amount over $200. Generally, all or part of this amount can be claimed up to a limit of 75 per cent of a person's net income. Gifts of certified cultural property or ecologically sensitive land might be eligible for claims of up to 100 per cent of a person's net income. In addition, that person will generally be eligible for a provincial tax credit, which varies between provinces.

There are three ways to maximize tax credits for donations:

* Donate over $200 in order to increase a federal tax credit. Amounts over $200 are eligible for a 29 per cent credit.

* It may be advantageous to save donation receipts for up to five years and claim them all together (this is especially beneficial for claims exceeding $200).

* Combine receipts with a spouse or common-law partner and claim them all on the return that will allow for the highest tax credit rate.

In today's electronic world, many charities solicit donations online. If they do so, they should be responsible for information protection. Read the charity's privacy policy before making a donation online. Only give donations through secure Web pages. For those unwilling to donate online, contact the charity and ask them for other ways to contribute.

Canada Revenue Agency has a list of all registered charities in Canada. This list contains the name, information about the charity's activities and financials, and contact info. The list can be accessed online at


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