Olev Edur answers your questions about your rights, personal finance, and estate planning
My income has always been too low for me to donate to charities, except here and there locally. I’ve needed pretty much everything I earned (or have been getting in pensions since I retired last year). But this year I received a sizable inheritance; I know I won’t ever need all that money, so I’ve begun thinking about making larger donations.
A friend told me a little while ago about the big tax credits she got from donations she made. I checked online, but I don’t understand how this tax credit works. I see the top tax credit is 33 per cent— does this mean that if I make a donation of $10,000, I could get as much as a third of my money back?
Not really. First of all, the charitable-donation credit is non-refundable, which means you can use it only to offset your income tax for the year—you can’t use it to get a cash refund. Second, that 33 per cent rate can be used only to offset the tax on income that is taxed at the 33 per cent rate; for the 2024 tax year, this means that you must have had an income of $246,752 or more.
For the rest of us, the first $200 of donations each year is accorded a 15 per cent credit, and the rate on donations in excess of $200 is 29 per cent. In addition, the provinces have charitable-donation tax credits, so in the end, the total credit rate on donations in excess of $200 would be higher than 29 per cent. In any event, you still have to have taxes to offset with the credits.
Regarding your friend’s claim about big tax breaks, the 29 per cent (federal) credit can be applied even against taxes that have been levied at 15 per cent (the lowest federal rate). This means that if, for example, your income included $10,000 that was taxed at a 15 per cent federal rate (for a bill of $1,500), you’d need to make a donation of less than $5,200 to offset all the federal tax on that $10,000 in income. That’s why the tax credit seems—and actually is—so generous.
You can donate every year, but you can also carry forward your credit claims for as long as five years. You might want to do that because then you could claim several years’ worth of credits at once—you’d incur the lower-rate credit on the first $200 only once; the rest of your donations would be accorded the 29 per cent rate.
