It’s Better to Give…Before the First-Time Charitable Donor’s Super Credit Disappears

In the spirit of the season, it’s heartwarming to know that the vast majority of Canadians are lending a helping hand to those in need. And what goes around comes around: be sure to inform your clients about tax credits they may qualify for, thanks to their generosity.

In fact, 82 percent of Canadians made a financial donation to at least one charitable or non-profit organization, according to 2013 data from Statistics Canada’s General Social Survey on Giving, Volunteering and Participating. Although the number of donors was down slightly from 2010 (by 2 percent), the total amount donated increased by 14 percent from 2010 to 2013. In 2013, the average annual donation by individuals was also up, rising $61 to $531 over the same period.

Claiming charitable donations on the tax return is not as simple, however, as writing a cheque or clicking “donate” to make the actual gift. For the last time in 2017 be sure to claim the First-Time Donor’s Super Credit (FSDC), which will be eliminated December 31. What’s required to get an addition 25% credit on top of the regular claims is a cash donation of up to $1000.

There is further complexity since 2016, when a new high income tax rate was introduced by the federal government.  Here’s how it all works:

• Donations up to $200: For those who donate smaller amounts, the credit for the first $200 is calculated at a federal rate of 15 percent. So a donation of, say, $100 earns you a non-refundable credit of $15.

• Donations by Mid-Income Earners: If your income is below the high-income threshold to which a 33-percent federal tax rate applies, you’ll receive a credit calculated at 29 percent for the amount of your donation that exceeds $200. For example, a donation of $1,000 would earn you a non-refundable federal tax credit of (15% x $200) + (29% x $800) = $262.

• Donations by High-Income Earners: Starting in 2016, if some of your taxable income is taxed at 33 percent, you’ll get a credit for the lesser of 33 percent of the amount of the income taxed at 33 percent, and the amount of your donations, less $200. (Yes, it’s tricky!) The remaining amount of your donation would be eligible for the credit at 29 percent.

There is still time to give the gift that keeps giving back – your generous contributions to registered charities in your community.  Especially at this time in the year, it feels great to give.  It’s also nice to know you can get some credit from the government when you file your tax return in the spring, for improving the well-being of your community now.

Additional educational resources: Investment Strategies in Charitable Giving course;  Knowledge Bureau’s Income Tax Estimator will help you calculate these credits.

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