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.
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.