These are treated differently on your tax return and might have tax benefits, but might not.
When you make a donation to a registered charity, you are able to claim the amount as a non-refundable tax credit. Your donation amount saves you about 30% of its value in reduced taxes (15% on the first $200 of donations and 29% on the amount in excess of $200), if you have tax owing after considering your other basic personal credits. If your personal credits are sufficient to offset your amount of income tax, then the donation amount will not give you any additional benefit and will not create a refund. It can only serve to reduce the amount of tax you owe. Unclaimed donations can be carried forward for up to 5 years, so if you do have a larger amount of income in a future year, or in your final year, it could still be beneficial.
So, by all means, make your charitable donations to support the organizations that do good work that you value, just don’t do it only for the tax savings that you might or might not realize.
Political contributions to an individual candidate or to a registered political party also produce a tax credit which is separate and different from charitable donations. The maximum amount you can claim is $1650 which produces a nonrefundable credit of $650, or about a 40% credit.
Lastly, sometimes organizations sell tickets to charity events. This is not the equivalent of making a charitable donation because you are receiving something of value in return: an event, a meal, or a chance to win a prize. Therefore, there may be no deemed donation at all, or maybe part of what you paid is considered an eligible donation, so you might get a receipt for part of what you paid.
No matter which of these three programs you contribute to, there is value in the satisfaction of supporting a cause or event that you believe in. But if you are doing it for the tax benefits, be sure of what you are doing before sending the cheque, handing over the cash, or transferring some of your investments.
We hope you will find this information valuable and will increase your financial confidence. You can always find these articles on our website anytime at www.actionfinancialgroup.com.
Karin Rimnyak, Certified Financial Planner®
David Dryburgh, Certified Financial Planner®
Ian Barrie, Certified Financial Planner®
This information has been prepared by Karin Rimnyak who is an investment Advisor for iA Private Wealth. Opinions expressed in this email are those of the Investment Advisor only and do not necessarily reflect those of iA Private Wealth. iA private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. iA Private Wealth is a trademark and business name under which iA Private Wealth Inc. operates.