Tax tip: Give and you will receive
If you’ve donated to charity this year, remember to claim the tax credits when you file your return.
Here are some tips from Chartered Accountant Cynthia Kett, Principal, Stewart & Kett Financial Advisors Inc., an advice-only financial planning, accounting and tax services firm in Toronto.
• Donations have to be made by Dec. 31st to claim them for that year. If you choose not to claim them, they can be carried forward for up to five years.
• Total donations in excess of $200 are eligible for a 29 per cent federal tax credit and an 11.16 per cent Ontario tax credit. These credit rates are equivalent to the highest (marginal) tax rates for Ontario taxpayers.
• To maximize your tax credit, have one spouse, or common-law partner, claim all the donations and/or accumulate your donation credits for more than one year to exceed the $200 super-credit threshold.
• Donations can be made ‘in kind’ rather than in cash.
• A proposed amendment to the Income Tax Act, effective December 5, 2003, limits the value of a donated asset to the donor’s cost of property if it was donated within 3 years of the date of acquisition.
• Capital gains triggered by donating publly traded securities to charitable organizations other than a private foundation are eligible for a reduced income inclusion rate of 25 per cent versus the usual 50 per cent. Thus, only one quarter of the gross capital gain is taxed at the marginal rate.
• The annual donation limit of 75 per cent of net income is increased by 25 per cent of any taxable capital gain realized on a donated asset.
• In the year of death, or the preceding year, the donation limit is 100 per cent of net income.”
For further information about taxes, contact a Chartered Accountant.
Brought to you by the Institute of Chartered Accountants of Ontario.