Northern Alberta Institute of Technology

How to get the most tax benefit from your charitable donations

We may not think of cashing in on great deals during the holidays as “doing our part,” but it’s actually good for more than just taking the edge off seasonal spending.

In 2015, Statistics Canada reported that consumer spending on items including food, electronics and jewelry jumped as much as 114% between November and December of 2014. With retail, Christmas can be the fuel in the engine of the economy.

Our inadvertent helpfulness shouldn’t be limited to fulfilling the wish lists of loved ones, suggests JR Shaw School of Business instructor Stacey Cooper. “We can’t forget that we live in a community that supports us and our families. It’s important to give back to it by donating.”

As a bonus, the return on giving to charities is more than just gratitude. Here, Cooper explains how to get the most tax benefit out of directing holiday goodwill toward organizations in need.

Be sure it’s legit

“Whenever you make a donation, make sure [it’s to] an actual registered charity that can issue you a receipt.” Every bona fide charity is listed by Canada Revenue Agency and is given a charitable registration number. If it doesn’t have that, it can’t issue you a receipt for your tax return – and may not be legitimate.

There’s no minimum limit for issuing a receipt, says Cooper, but most charities won’t give one for less than $20.

A purchase is not a donation

You shouldn’t get anything in exchange for making a donation, Cooper points out. That means if you’ve paid for a small item such as a calendar or chocolates, you’ve simply bought something. Don’t expect a receipt you can use on your tax return.

That said, in some instances, a portion of what you give may be eligible for a tax credit. For example, says Cooper, “If you buy a ticket to a charity dinner for $500 and the actual cost of the meal is $100, you would be issued a receipt for the $400 excess.”

Don’t delay

Donations you wish to claim on your 2018 tax return must be made in 2017. Keep in mind, however, that charitable organizations aren’t required to issue the tax receipt immediate (so don’t wait until the end of December to give). Best practice, says Cooper, is to “keep track of it for your own purposes.” That is, don’t forget about it – you can also claim it next year.

Maximize the credit

Alberta is a great place to donate, offering some of the highest credits in Canada. The first $200 donated is credited at 25%; after that, it’s 50% (for a total of no more than of 75% of your income). For example, donate $500 and you’ll get $50 back on the first $200 and $150 on the remaining $300, for a total credit of $200.

Within families, the payback can get even better. “Maximize your donations by claiming all of them on a single taxpayer,” says Cooper. Make the most of that 50% credit by bundling all the donations onto a single return. “You’ll get more of the tax credit and more money back in your pocket.”


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