Canadians are generous with their charitable giving, with gifts totaling more than $10 billion annually. A part of the reason behind this is that Canadian tax laws allow people who donate to charity to receive a generous tax credit for their donations. In addition, the first-time donor super credit is an extra enticement created for people who have never donated or, at least, not in a long time. Under this program, qualifying donors get an extra tax credit worth up to 25% of their donation.
Tax Incentives for Donors
The federal charitable donations tax credit provides a tax incentive for Canadians to donate to charities. It can reach up to 29% of the value of the donation, along with additional amounts that vary from province to province, but go up as high as 24%. To maximize the credit, it is permitted, and a good idea, to group donations among spouses. This is because donations below $200 are eligible only for a 15% credit, while those over that limit get a credit of 29%. By grouping the donations, you only get the 15% lower credit once per family.
To claim your credit, you must have received a proper receipt from the charity to where you made a donation. The receipt must include the charity’s full coordinates, its Canada Revenue Agency registration number, your coordinates, and the amount of the donation.
Since 2013, but only up to 2017, there is another way to increase the value of the credit: the first-time donor super credit.
The First-Time Donor Super Credit
This credit, which was introduced in the 2013 budget, gives new donors an additional 25% credit, on top of the basic federal and provincial credits, on qualifying donations to registered charities. The credit is temporary and can only be claimed once by a taxpayer in the years 2013 to 2017. After that, it will expire unless it is prolonged by the government.
Contrary to what the name might suggest, you do not have to be a true first-time donor to qualify. Rather, anyone who has not claimed a charitable donation credit since 2007 is deemed a first-time donor and can qualify for the credit.
The credit applies only to a gift of money, as opposed to gifts in kind, made after March 20, 2013, up to a maximum of $1,000. If you have a spouse or common-law partner, you can share the claim for the FDSC, but the total combined donations claimed cannot be more than $1,000.
For example, assume you give $1,000 in cash to a registered charity and the rate of your provincial credit is 20%. Your federal tax credits are $30 on the first $200 (15% * $200), $232 on the $800 (29% * $800), and a $250 first-time donor super credit, for a total of $512. Additionally, you get a $200 provincial tax credit (20% * $1000).
The combined federal-provincial total credits of $712 mean your out-of-pocket cost of a $1,000 donation is therefore only $288.