Extension of Donation Deadline – Gifts in Kind Don’t Qualify

Joanne Thomas & Evelyn Jacks

Last week Finance Canada released draft legislation to confirm the extension of the charitable donation deadline for the 2024 tax year to February 28, 2025. But it’s not for all donations. The fine print in this legislation matters before going ahead and making the donation. Check it out:

The Backdrop.  This new draft legislation introduced January 23, backs up the extension announcement made on December 30.  It notes that the draft legislation will be introduced in Parliament “in due course”, but of course, Parliament is prorogued and no law can be passed until the House sits again.  But, given the need for tax “certainty” by donors, the January 23 does not allow for feedback on the proposals – it will not be solicited – and that’s too bad because not all gifts will qualify for the extension.  Here are the specifics:

New Subsections Added.  In response to the 2024 postal strike that began on November 15, 2024, Finance Canada has drafted new subsection 110.1(18), which extends the deadline for making donations eligible for deduction in the 2024 tax year, until February 28, 2025.

Provided that gifts are made before March of 2025, they will be deemed to have been made in a taxation year that ends after November 14, 2024, and before 2025 (the "donation year"), and not in the taxpayer's 2025 taxation year.  However, the gifts must meet these criteria (not the importance of the way the gift was made – gifts in kind do not appear to qualify):

• the gift would be deductible under section 110.1 in computing the taxpayer's taxable income under Part I for the year if it were made immediately before the end of the donation year;
• the taxpayer deducts the amount of the gift under this section for the taxpayer's donation year; and
• the gift was in the form of cash or was transferred by way of cheque, credit card, money order or electronic payment.

This would suggest that gifts in kind – like the transfers of securities - will not qualify.

New subsection 118.1(29) provides that gifts made before March of 2025 are deemed to have been made in a taxation year of an individual that ends after November 14, 2024, and before 2025 (the "donation year"), and not in the individual's 2025 taxation year, if

• a credit for the gift would be deductible under section 118.1 in computing the individual's tax payable under Part I for the year if it were made immediately before the end of the individual's donation year;
• the individual claims the amount of the gift under subsection 118.1(3) of the Act for the individual's donation year;
• the gift was a gift in the form of cash or was transferred by way of cheque, credit card, money order or electronic payment; and
• the gift was not made
  • through a payroll deduction, or
  • if the individual died after 2024, by the individual's will.

How Charitable Donations are Claimed in Canada.  It is estimated that nearly $5 billion will be donated to charities across Canada in 2024. There are approximately 86,000 registered charities in Canada, categorized as:

1. The relief of poverty
2. The advancement of education
3. The advancement of religion
4. Other purposes beneficial to the community

Claiming Donations as Tax Credits. Charitable donations are eligible for tax credits within the year the donation is made. Taxpayers can claim the eligible amount of their donations up to a limit of 75% of their income. Tax credits are calculated as follows:

• 15% for the first $200 in donations
• 29% for donations exceeding $200

A comprehensive list of eligible donations is available on the Canada Revenue Agency (CRA) website. (See List of charities and other qualified donees - Canada.ca)

CRA’s Position - New Rules for the Extension.  The CRA has confirmed it will administer this extension, allowing taxpayers to claim donations made up to February 28, 2025, on their 2024 income tax return. Key details include:

• Donations made between January 1, 2025, and February 28, 2025, can either be claimed on the 2024 or 2025 income tax return.
• Donations made before March 2025, after the end of a taxation year that concluded after November 14, 2024, and before 2025, can be claimed for the 2024 tax year.

Exceptions to the Rules.  As per the Finance Department, CRA notes the gift would have been deductible if made before the end of the taxation year and the gift was in the form of cash, cheque, credit card payment, money order, or electronic payment.  But it does not list all the exceptions.

Receipting.   CRA notes that a charity or other qualified donee is not required to issue official donation receipts specific to the extension period but that it may wish to do so as a courtesy to its donors, if they generally receive only one annual receipt for multiple donations.

Further, the extension will not affect how charities and other qualified donees report tax-receipted revenue on your 2024 and 2025 information returns.   But:  all official donation receipts issued during your 2025 fiscal period should be reported on your 2025 information return.

Bottom Line:  Consult the legislation before making any donation you are expecting to write off in the tumultuous 2024 tax filing year.