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The Ins and Outs of Making Donations

making donations for BC wildfire and other causes

Wildfires in BC’s Interior this summer have prompted many individuals and businesses to make donations.

Wildfires have sparked evacuations of several B.C. communities this summer. With many people forced to leave their own homes, they’ve needed to rely on assistance from family, friends, strangers and charitable organizations like the Canadian Red Cross. While most people donate out of good will, there are also opportunities for making donations and using them as a tax deduction.
Sharlane Bailey, owner of Canwest Accounting in Victoria and on the Westshore (Langford), says qualifying for a tax deduction can be particularly confusing, especially for infrequent donors.

“While preparing individuals’ personal income tax returns we may receive notes indicating donations to a GoFundMe campaign, raffle tickets purchased to support a cause, or even receipts for items purchased and donated,” Bailey says.

“Unfortunately, the only ones that are valid to claim are tax receipts from a charity registered in Canada, featuring the organization’s charitable number.”

Before making a donation, if you are intending to garner a tax benefit from it, she recommends going to the List of Charities page on the Government of Canada website to check on the organization’s status.

The usual formula for working out the tax deduction is 15% of total donations under $200, and 29% of the portion over $200. Interestingly, anyone who hasn’t claimed a donation between 2013 and 2017 may be eligible for a super credit of an added 25% for up to $1,000 in donations.

Tax deductible donation checklist:

Acceptable for tax deductions:

  • Receipt from a charity registered in Canada
  • Receipt from attending a charitable event (eg. gala fundraiser) – only a portion of the ticket fee can be claimed, that amount will be stated on the charitable tax receipt
  • Receipt from a foreign charity registered in Canada

Not acceptable for tax deductions:

  • Receipt from a foreign charity NOT registered in Canada (eg. orphanage in Mexico)
  • Raffle tickets
  • GoFundMe and other online fundraising campaigns to benefit individuals
  • Sales receipts for items donated to a charity (eg. cans of soup donated to the Food Bank)
  • Donations made without receiving a valid tax receipt

For corporations, the tax receipt must be made out in the company’s name, and can be 100% deductible. For a sole-proprietor, instead of making a cash donation, it could make more sense to purchase items to donate to an organization, such as grocery store gift cards for the Canadian Red Cross versus. In that case, the receipt may qualify as a full tax deduction under advertising and promotion, for example.

Making donations can include in-kind contributions

Companies planning to donate items from their own inventory can only write off their cost of the item, not what they would sell it for. Those looking at donating their skills (such as art or carpentry) might want to investigate whether an “in kind” donation is possible, which means they would receive a tax receipt from the registered Canadian charity reflecting the value of the labour they donated.

“These latter examples are a bit more complex; therefore, we recommend speaking with your bookkeeper or accountant if your intention is to receive a tax benefit from a donation,” said Bailey.

DISCLAIMER
The suggestions and advice provided by Canwest Accounting should not be relied upon in place of professional advice. You are responsible for checking the accuracy of relevant facts and opinions provided.

 

2016 Personal Tax Checklist

It’s Personal Income Tax Time Again…

At Canwest Accounting, we are happy to help you with your personal income tax returns.  That’s why we have created a “2016 Personal Tax Checklist” for you to fill in before you come to see us.

Simply print out the checklist, fill in, then let us help you with the rest!

Download: 2016-personal-tax-checklist (PDF)

 
2016-personal-tax-checklist-2

Student Tax Tips

Students save with “extra credits” this term!

student tax creditsThe Canada Revenue Agency (CRA) is helping you keep more money in your pocket with tax credits, deductions, and benefits for you when you do your taxes. Even if you have little or no income, you should still file your income tax and benefit return to claim tax credits and get benefits and credits.

Here are nine of your top tax-time savings and potential benefits and credits. Remember you need to file on time if you want your credits!

Eligible tuition fees – You may be able to claim the tuition fees paid to attend certain post-secondary educational institutions for the tax year in question.

Education amount
– As a full-time student (or a part-time student, who has a certified mental or physical impairment or who is eligible for the disability tax credit), you can claim $400 for each month you were enrolled in a qualified education program in a designated educational institution. As a part-time student, you may be able to claim $120 for each month you were enrolled.

Textbook amount – Claim this amount only if you are entitled to claim the education amount.
$65 for each month you qualify for the full-time education amount
$20 for each month you qualify for the part-time education amount

Interest paid on your student loans – You may be able to claim an amount for the interest paid in 2016 on your student loan for post-secondary education after you complete your education. You can also claim interest paid over the prior five years if you haven’t already claimed it. It must be interest paid on a loan received under the Canada Student Loans Act, the Canada Student Financial Assistance Act, the Canada Apprentice Loans Act, or a similar provincial or territorial law.

Public transit amount – You can claim the cost of eligible public transit passes or eligible electronic payment cards for travel within Canada on public transit for 2016.

Eligible moving expenses – If you moved for your post-secondary studies and are a full-time student, you may be able to claim moving expenses. You can deduct these expenses only from the part of your scholarships, fellowships, bursaries, certain prizes, research grants, and artists’ project grants that have to be included in your income. If you moved to work, including for a summer job, or to run a business, you may also be able to claim your moving expenses. However, you can deduct these expenses only from the income you earned at the new work location. To qualify, your new place of residence must be at least 40 kilometres closer to your new school or work location.

student tax preparation

Goods and services tax/harmonized sales tax (GST/HST) credit – If you are turning 19 before April 1, 2018, you may be eligible for the GST/HST credit. The CRA will determine your eligibility when you file your 2016 tax return and will send you a notice if you are eligible for the credit.

Canada child benefit (CCB) –The CCB is a tax-free monthly payment made to eligible families to help them with the cost of raising children under the age of 18. The CCB might include the child disability benefit and any related provincial and territorial programs. It replaces the Canada child tax benefit, national child benefit supplement and the universal child care benefit.

Child care expenses – If you pay someone to look after your child while you go to school, you may be able to deduct child care expenses.

You may be able to transfer the unused amount from your eligible tuition fees, education and textbook amount to a parent, grandparent, or to the parent or grandparent of your spouse or common-law partner. For information on this and other topics of interest to students, go to cra.gc.ca/youth or read guide P105 Students and Income Tax.

First-Time Donor Super Tax Credit

Incentive to donate!

The temporary First-Time Donor Tax Credit adds 25% to the rates used to calculate the non-refundable tax credits of up to $1,000 in monetary donations. As a result, a first-time donor will be allowed a 40% federal credit for donations of $200 or less, and a 54% federal credit for the portion of donations over $200 but not exceeding $1,000.

For example, a $500 donation will receive a total tax credit, including federal and provincial credits, of $286. That’s $125 higher than the current credit.

Donations made after March 20, 2013 will qualify as an eligible donation. To qualify as a first-time donor, the individual, nor the individual’s spouse, cannot have claimed donations in any of the 5 preceding tax years. This temporary credit is in effect from 2013-2017 and can only be claimed once.

Tax-Free Savings Accounts

Tax-Free Savings Accounts (TFSA) are a great way to save money.

Interest, dividends, and capital gains earned on investments in a TFSA are not subject to tax, either while held in the account or when withdrawn. This means that they will not affect your eligibility for Federal income–tested government benefits and credits such as Old Age Security (OAS) or the Goods and Services Tax (GST) credit.

Unused TFSA contribution room is carried forward and accumulates in future years. You can withdraw funds from your TFSA whenever you want and use the funds for multiple purposes. This makes a TFSA ideal for both your short and long-term investment goals.

You don’t need to have earned income to contribute to a TFSA. This is excellent news if you are retired or a stay-at-home parent. Your spouse or common-law partner can give you funds to contribute to your own TFSA. There is no lifetime limit on the amount of your TFSA contributions. If you are eligible, you will accumulate contribution room equal to the annual contribution limit for every year you are a resident of Canada, which will increase with inflation, in $500 increments.