Charitable donations: deadline extended for 2024 tax year

The Canada Revenue Agency has confirmed that it will proceed with extending the deadline for charitable donations to February 28, 2025 because of the Canada Post strike. Normally, the deadline is December 31 to claim a charitable donation tax credit for the year.

Note that donations must be in cash or transferred via cheque, credit card, money order, or electronic payment. As such, in-kind transfers of securities are not eligible for the deadline extension.

Maximizing your impact: The tax benefits of charitable donations in Canada

Charitable donations do more than support important causes—they also offer you tax benefits. By understanding these benefits, you can optimize your donations and reduce your tax bill.

When you donate to a registered charity in Canada, you qualify for a non-refundable charitable donation tax credit. This credit reduces the amount of federal and provincial taxes you owe, effectively lowering your overall tax bill. The amount of the tax credit depends on the size of your donation, your income level and your province of residence.

Federal tax credit

The federal charitable donation tax credit is calculated in two tiers:

  1. First $200 of donations: You receive a 15% federal tax credit on the first $200 of your eligible donations for the year.
  2. Donations over $200: For any donations over $200, the federal tax credit increases to 29%. If you’re in the highest tax bracket, this rate can go up to 33%.

Provincial tax credit

In addition to the federal credit, each province and territory offers its own charitable donation tax credit, which varies in percentage. The provincial credit follows a similar tiered structure, boosting your overall savings.

Here’s an example of how much you save in taxes if you donate $500 and live in Ontario.

Donation amount Federal tax credit Ontario tax credit Total tax savings
First $200 $30 $10.10 $40.10
Remaining $300 $87 $33.48 $120.48
Total $117 $43.58 $160.58

In Ontario, a $500 donation saves you $160.58 in taxes, if you’re not in the highest federal tax bracket.

Maximizing your tax savings

To make the most of your charitable donations, consider the following strategies:

  1. Combine donations: If you and your spouse or common-law partner both donate, you can combine the donations on one tax return. This strategy can maximize the tax credit, especially if the total exceeds $200.
  2. Carry forward unused donations: If you can’t use the full tax credit in the year you donate, you can carry forward unused amounts for up to five years. Generally, the maximum donation that can be claimed in a year is 75% of net income. This flexibility lets you plan your tax savings strategically.
  3. Donate securities in-kind: Instead of cash, you can donate stocks, bonds, or mutual funds, which is especially beneficial if they have increased in value. By donating the securities directly rather than selling them first and then donating the cash, you avoid the capital gains tax and still receive a charitable tax receipt for the full market value.
  4. Corporate donations: If you own a private corporation, donating securities in-kind through it can offer additional tax benefits. You can deduct corporate donations from the corporation’s net income and potentially reduce its overall tax liability. In addition, the non-taxable portion of capital gains is added to the corporation’s capital dividend account (CDA) which can then be used to pay tax-free capital dividends to shareholders.
  5. Estate planning and charitable giving: Including charitable donations in your estate plan can be a meaningful way to leave a legacy. Doing so provides significant support to causes you care about while potentially reducing the tax burden on your estate.

Choosing the right charity

Ensure that your chosen charity is registered with the Canada Revenue Agency (CRA) to qualify for the tax credit. The CRA’s website provides a searchable list of registered charities, allowing you to verify their status and view their financial information.

Contact your Manulife Wealth advisor

Charitable giving is not only deeply rewarding but it also provides valuable tax credits. Speak with your Manulife Wealth advisor to create a tailored giving strategy that aligns with your financial goals and maximizes your benefits.

The Advisor and Manulife Wealth Inc. and/or Manulife Wealth Insurance Services Inc. ("Manulife Wealth") do not make any representation that the information in any linked site is accurate and will not accept any responsibility or liability for any inaccuracies in the information not maintained by them, such as linked sites. Any opinion or advice expressed in a linked site should not be construed as the opinion or advice of the advisor or Manulife Wealth. The information in this communication is subject to change without notice.

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