Tax Tip: Deducting Political Contributions

Elections bring with them important opportunities to discuss Canada’s future social, economic and tax policies. So, it’s appropriate to go back to “tax school” to find out the tax consequences of making political contributions.

While no deduction is allowed, a non-refundable federal political contribution tax credit is, provided the money is given to a registered federal political party in Canada or to a candidate for election to the House of Commons under S. 127(3). Contributions must be monetary; that is, there is no credit for the value of contributions in kind, such as volunteering to assist with various aspects of the election.

In fact, recent proposed changes to S. 127(3) require that the amount eligible for the credit must be reduced by the value of any advantage that may be afforded the taxpayer or anyone related to the taxpayer as a result of the contribution.

The credit is 75% of the first $400 of the political contribution, plus 50% of the next $350, plus 33-1/3% of the rest of the contribution, to a maximum of $750—for a maximum total credit of $1,225. The credit is claimed on the income tax return for 2015 on line 410 of Schedule 1 Federal Tax and may be claimed by either the taxpayer making the contribution or the spouse or common-law partner. Receipts are required, unless the contributions are allocated to a taxpayer who is a member of a partnership.

It should be kept in mind that the Elections Act also imposes limits on the amount that can be contributed by a taxpayer. The full story on financing elections is found at Elections Canada online. Briefly:

• Corporations and trade unions may not make contributions to political entities.

• Effective January 1, 2015, a citizen or permanent resident of Canada can give up to $1,500 each year in total to each registered political party; up to $1,500 each year in total to the registered electoral district associations, nomination contestants and candidates of each registered party; up to $1,500 in total to the leadership contestants of a registered party in a particular contest; and up to $1,500 for a particular election to each candidate who is not endorsed by a registered party. (The sum of these three amounts cannot at any time exceed the $1,500 contribution limit).

• A nomination contestant is permitted to give an additional $1,000 in total per contest in contributions, loans and loan guarantees to his or her own campaign.

• A candidate is permitted to give a total of $5,000 in contributions, loans and loan guarantees to his or her campaign, as well as an additional $1,500 in total per year in contributions, loans and loan guarantees to other candidates, registered associations and nomination contestants of each party. (This includes contributions to the registered association in the candidate’s electoral district and contributions to the candidate’s own nomination campaign.)

• A leadership contestant is permitted to give a total of $25,000 in contributions, loans and loan guarantees to his or her campaign, as well as an additional $1,500 in total per year in contributions, loans and loan guarantees to other leadership contestants.

• The limits increase by $25 on January 1st in each subsequent year.