Other income and deductions and basic Division ‘C’ deductions
62 How are charitable donations and political donations treated on a tax return? Why are they treated this way?
Arvind Harry
Charitable and Political donations create tax credits on an individual’s tax return. The calculations are as follows:
Charitable Donations (ITA 118.1(1))
For those with taxable income up to the upper federal income threshold ($246,752 for 2024)
- A federal level credit limit will be 15% of the first $200 donations
- 29% of additional donations
For taxable income greater than the upper federal income threshold
- The credit will be 15% of the first $200
- 33% of the lesser of
- the amount that your taxable income exceeds $246,752;
- or by the amount your donation exceeds $200
- This increase is to encourage the wealthy to donate more
In 2024 this is formulized as (A x B) + (C x D) + (E x F), where:
|
A |
The appropriate percentage for the year (15%) |
|---|---|
|
B |
The first $200 of the donation |
|
C |
33% |
|
D |
The lesser of the amount that either your income exceeds $246,752 or your donation exceeds $200 (only applicable when income exceeds $246,752 limit) |
|
E |
29% |
|
F |
The remaining amount of the donation that surpasses $200 |
So, in the formula above, ‘(C X D)’ would only apply to individuals who are taxed at the highest federal marginal tax rate.
Example: John, who has a taxable income of $50,000 donates $800 during 2024. His tax credit would be calculated as follows:
15% of the first $200 = $30
29% of the remaining $600 = $174
$204 ($30+$174) is the amount of his charitable donation tax credit in 2024.
Example: Deepesh has a taxable income of $312,000, he donates $16,000 during the year. What are his tax credits for the year?
15% of the first $200 = $30
33% of the lesser of ($16,000-$200) or ($312,000-$246,752) -> $15,800<$65,248
33%*$15,800 = $5,214
$5,244 ($30+$5,214) is the amount of his charitable donation tax credit in 2024.
An individual can only claim donations up to 75% of their Net Income For Tax Purposes. Additional amounts can be carried forward 5 years.
Political Donations (ITA 127(3))
The political donation federal tax credit is dependent on the amount donated as follows:
$1 to $400: Tax credit equals 75% of the amount (Max $300)
$401 to $750: $300 plus 50% of the amount > $400
$750 to $1,275: $475 plus 33 1/3% of the amount > $750
$1,275 plus: $650 maximum
Why are these rates different than other tax credits?
In general, better tax credit percentages (i.e. greater than 15%) are given to donations to encourage individuals (particularly wealthy individuals) to donate.
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Author: Emily Hou, January 2020
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October 2024
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