By Gordon Pape, Editor and Publisher
The Christmas season is a time to think about others – and also an opportunity to cut your 2019 tax bill.
You’ll recall that one of the early scenes in A Christmas Carol involves the visit of two local businessmen to the establishment of Scrooge and Marley, where they attempt to inveigle Mr. Scrooge into contributing to the Victorian equivalent of the United Way. I’m sure you also recall Scrooge’s response: “I help to support the prisons and the workhouses, and those who are badly off must go there.”
Of course, none of us think we’re anything like old Scrooge. But often at this time of year we get so caught up in our own family festivities that we lose sight of the fact that many people are less fortunate.
I was reminded of that when I opened my financial file yesterday and found myself facing a stack of charitable appeals that I’d tucked away for future action. It’s easy enough to do. We’re so bombarded with email and telephone solicitations from non-profit foundations and charitable organizations that we tend to shunt them aside from sheer exasperation. But there are a lot of organizations out there that do very good work. Pick the ones you think are most worthy of support, and spend an hour or so in the quiet period between Christmas and New Year’s catching up on your donations.
Here’s a quick summary of the tax rules relating to charitable donations that may encourage you to give a little more. Who knows, if they’d been in existence in Scrooge’s time, he might not have been so grouchy when the fund-raisers came calling.
- If you want to claim a donation for this year, it must be sent in by midnight on Dec. 31.
- You get a federal tax credit of 15% on the first $200 worth of donations. After that, the basic federal credit rises to 29%.
- Donations are treated as tax credits on your federal return, which in theory makes them of equal value to everyone.
- You’ll receive an additional credit for provincial taxes. The amount varies depending on where you live.
- You do not have to claim your charitable donations during the calendar year. They can be carried forward up to five years (or you can go back five years if you have past receipts you haven’t claimed). There are very few situations in which carrying forward makes sense. In some cases, the tax value of the donation could actually drop in the future, if tax rates come down. As a general rule, you should only carry forward your donations if you haven’t exceeded $200 (in which case you should wait until your total is high enough to take advantage of the 29% credit).
- The limit for charitable donations is 75% of net income. This could be especially useful for people donating collections to charity (art, fine wine, etc.)
- Give on-line. It’s quick and easy and in most cases you’ll receive a tax receipt by email within minutes.
- Special tip: If you have a credit card that accumulates points make your charitable donations that way. I use my Aeroplan MasterCard, so my contributions are aiding those in need and while at the same time earning free flights.
On behalf of the entire team at BuildingWealth.ca, I would like to extend our best wishes for a safe and enjoyable holiday season. And to our loyal newsletter subscribers, thank you for your continued confidence and support.
Here’s to a successful and prosperous 2020.