CRA has announced that all Charitable Donations made until February 28, 2025, will be allowed as a credit on your 2024 personal income tax return. This is all because of the four-week postal work stoppage mid November to mid December 2024.
Normally only donations made by December 31 2024 are allowed to be claimed, but CRA has extended the deadline for this year only to February 28 2025.
Many charities receive the bulk of their donations by cheque in the mail during the month of December. Some charities had their own annual mail-out delayed because of the mail disruption. And many people did not make their donations in time for the usual December 31 deadline.
I think this was only fair to the charities in our communities and our country that the deadline was extended.
Quick review of Donations and Taxes
Donations are not a tax deduction. Meaning they do not reduce your taxable income. Instead, they are a non-refundable tax credit. All non-refundable tax credits can reduce your taxes payable. But only if you have taxes to reduce!
Taxes Payable?
Not all tax filers benefit from charitable donations. If you (and your spouse) have no taxes payable, adding donations to your tax return will not help you.
Do not confuse “getting a refund” with no taxes payable. To find out if you have taxes payable, check your 2023 tax return or notice of assessment. Look for line 43500 Total payable. If it says zero, then adding more credits to your tax return will not increase your refund.
If you do have an amount on line 43500, Total payable, then donations will reduce your taxes payable and either increase your refund or reduce how much you might owe for 2024.
Donations over $200
Donations of $200 or less each year only provide tax savings about 25% of the amount donated. If you donate $200, your tax savings are about $50.
Donations over $200, get a tax credit of about 45%! So, it makes sense to claim more each year. If you donated $400, your tax savings are about $145: $50 saved on the first $200 and about $95 saved on the next $200. You can do the math on the higher numbers. It is close to one-half of the amount of the donations that are over $200.
Combine spouse’s
If both spouses make donations, it makes sense to combine and claim on one tax return; then the first $200 gets a small credit and the combined amount over $200 gets the bigger tax credit.
Combine Years
If you do not make sizeable donations each year, you can still benefit from the higher tax credit. You can claim up to six years on one year. For example, if you had donated $200 each year the past six years: 2019 to 2024 and if you had not claimed them in each of those calendar years, you would have $1,200 to claim for 2024. Instead of saving $50 in taxes each year, you would now save $50 on the first $200 and another $466 on the next $1,000 in one year. The total taxes saved is $516, instead of only $300.
Donate Shares or Mutual Funds
Did you know you can donate some shares or mutual funds to one or more charities? The extra benefit is you do not pay taxes on the capital gains of those investments. I have assisted a few clients this past year and many over previous years. Donations have varied from about $10,000 a year to over $40,000 in one year.
These individuals were planning to donate large amounts to one or more charity, but instead of cashing in their investments and gifting the cash, they donated the investments and do not have to claim the capital gain on the increase in value. It becomes a win-win for both the investor and the charity. OK, CRA loses…. but not too many are sad about that!
Link Charity
If your favourite charity(ies) does not have their own brokerage account to accept the investments, you can use a service such as Link Charity. They are a charity themselves, and they assist other charities by allowing the investments to be transferred to them. They in turn give the money to the charities you request. I have used their services myself in the past and many of my clients have too. Works very well and very affordable.
Proper Receipts
Remember that not all organizations that raise money are charities. As tax preparers, we see many receipts that are not eligible. Many are thru Go-Fund me pages (rarely a proper receipt). Others are just not registered charities. So, before you donate, check their website or call and ask them for the charity number. It will be nine digits followed by RR000#. For example, 987654321 RR0001 would appear to be a legitimate registered charity.
There is no timeframe for a charity to issue the receipt, however, most are issued by the end of February for the previous calendar year. This year of course, donations made in January and February 2025 will likely have their receipt be sent out in March. So, if you want to claim it on your 2024 tax return, you will need to wait for it.
Anni Markmann is a Personal Income Tax Professional and Certified Financial
Planner; living, working, and volunteering in our community. Contact Ste
Anne Tax Service at 204.422.6631 or 36 Dawson Road in Ste Anne (near Co-op) or info@sataxes.ca