There is no shortage of things to think about as the year 2020 is about to come to an end. The pandemic is the priority for most and the great deal of stress it has created for every individual. However, even a pandemic does not remove the responsibility of having to file the year-end taxes. With this still being a responsibility to address it is worth taking some time to concentrate on what potential tax breaks like giving to a charity that may be available to you.
Think About Charities
Chances are if you are in a position to do so you have been considering some gifts to charity. The need for this has never been greater. With so many people being financially damaged because of the circumstances, many are not in a position to help others through charities. As a result, many of these agencies are really feeling the impact. The positive aspect is if you are able to give then you may be able to use this as a tax credit on your tax return. If you are considering this then you want to make the most of it.
Keep in mind that the tax deadline for being able to take advantage of this is December 31st. and you will want a receipt.
Some Options For Making The Most of This Credit
Cash Donations
Most spur of the moment donations are done by giving cash. This will allow you to claim a tax credit both on the federal and provincial levels. Add up the charitable donations that you have made throughout the tax year. For the first $200 you are claiming you will get a 15% federal tax credit. If you have donated over $200. The federal rate will increase to 29% for the amount above $200. Those who are in the 33% top federal rate will receive a 33% tax credit. The provincial credits are similar to the federal ones.
Credit Card Donations
For many, it is easier to make a donation by using their credit cards. This is the most common method when making a donation over the phone. An advantage to this method is the additional benefit of maybe enjoying some extra benefits that come from the credit card provider. For example points or travel credits.
Other Methods
Besides these two most common methods there are some high-income earners that will use other methods for donations that can include:
- The donation of RRSP withdrawals
- Donations involving employee stock options
- Appreciated securities in-kind donations
These are far more complex types of donations, but they may bring additional tax benefits to the giver.
Things to Keep In Mind
During the festive season there is a great influx of charities that are reaching out for donations. It is easy to get caught up in the many needs that are present. Especially this year due to the pandemic. But, putting emotions aside there are some things to keep in mind such as:
Make sure that the charity you are giving to is a registered charity if you want to claim your donation as a tax credit.
You will need to get a receipt although you will not need to submit this with your tax filing. However the CRA could ask for this in the future. Make sure you have it available should such a request be made.
Don’t over extend yourself. Remember if you are using your credit card that you will be paying interest on this if you don’t clear your balance.
If you are thinking of donating through one of the more complex methods then you should speak to an experienced accountant prior to doing this. So you can be sure that the donation will qualify for the tax credit and any other benefits you may be seeking.
Don’t forget about the limit. According to tax rules the maximum you can claim as donation cannot go over 75% of your net income for the year in which you are claiming. You can carry forward up to five years any unused donations. However, there are specific rules concerning this and again you should rely on a qualified accountant for advice.
If you want to make filing your taxes an easy process this year then why not use my services for your tax filing. This will give you peace of mind that your taxes are being done right and that you are getting all the credits that you are entitled to. Just give me a call or email me to set up an appointment. This can be done virtually for your safely during the COVID-19 crisis.
