Donation Deadline Draws Near

Ruth Horst

There is still time to give and save money: mark your calendar for February 28.  That is the deadline date to make cash, cheque, money order donations  to your favorite charity and claim the deduction on your 2024 tax return.

This extension aims to lessen the impact of the four-week Canada Post stoppage on charities and CRA will honor the revised deadline, despite the proroguing of Parliament.  Here are the details:    

The Backdrop.  The government pledged to introduce legislation addressing this extension once Parliament reconvened in the new year. However, as we know, Parliament was prorogued on January 6th and is not expected to resume until March 24th. Despite the delay in legislative processes, the Canada Revenue Agency (CRA) will honour the revised deadline

What Donations Qualify?  On January 23^rd, 2025, the Department of Finance offered further clarification regarding the extension. Only specific types of donations qualify for this extension. The donation must be made in cash only; the accepted method of donation is limited to cheque, credit card, money order or electronic payment. Any other donation, including those made through payroll deductions, or transfers of securities, are not eligible.

Tax Treatment.  Donations qualify for a claim as a non-refundable tax credit (NRTC). These types of credits are calculated, federally, at a rate of 15% meaning that for a taxpayer in the lowest tax bracket, the resulting amount of the calculation (the 15%) of a NRTC will reduce tax payable on a dollar-for dollar basis. 

For donations, the calculation works a differently.  There are three calculations:

• The tax credit for the first $200 of donations is 15%,
• A portion of the tax credit is calculated at 33% for those with incomes over $246,752.00,
• The balance is is eligible for a 29% tax credit.

There is a net income limitation – donations claimed can’t exceed 75% of net income (100% in the year of death or immediately preceding year)

Additionally, donations can either be claimed in the year that they are made or can be carried-forward for up to 5 years. Donations made by either spouse or common-law partner can be reported on one tax return; they do not need to be allocated to the taxpayer on the receipt.  So, especially in the case of smaller donations, grouping them together on one return to make a bigger claim (potentially over $200) makes sense.

As February 28^th rapidly approaches, let’s take a look at some examples on how donations can affect tax payable. 

Deirdre donates $100 each year to The United Way. The tax credit for the donation is $15 if claimed annually. Over 5 years, she would save a total of $75 in tax payable. However, if Deirdre saves her donation slips for 5 years she will receive a credit larger credit of $117.  The breakdown of this larger credit is: ($200 x .15 = $30) + ($300 x .29 = $87) = $117. 

If Deirdre’s spouse or partner has donations, they should be reported together for a better tax advantage.

For taxpayers in the highest tax bracket (33%), donations over $200 are credited at 33%, provided their income exceeds $246,752 (2024). In this case, the calculation would be:

• ($200 x .15 = $30) +
• ($300 x .33 = $99) = $129, assuming their income is at least $300 above $246,752 threshold.

If the taxpayer’s income is only $200 above the threshold the excess is calculated at 29%. The calculation would be:  

• ($200 x .15 = $30) +
• ($200 x .33 = $66) +
• ($100 x .29 = $29) = $125.

This is only the federal portion of the credit. Each Province/Territory has its own set of rates, which will similarly reduce provincial or territorial tax payable.

Bottom Line: There is still time to make a charitable donation for your 2024 tax return. It is important to know that CRA does not track donations, so it is the taxpayer’s responsibility to keep proper documentation (donation receipts) to support all donations claimed. Donations are a highly audited deduction by CRA.