Charities are allowed to claim deductions and gifts up to 75% of their net income. However, there are several exceptions to this rule. The CRA permits claims for up to 100% of a person’s net income during the year they die and the year before that. For corporate income tax returns, the rules remain unchanged, you can only claim up to 75% of net income.

Tax Accountant Toronto team state that if the organization you choose doesn’t fit into any of the following categories, your tax benefit claim might be denied:

  • A registered charity in Canada
  • A national arts service organization
  • Registered universities abroad but that are perceived to have students from Canada
  • A registered housing corporation established in Canada to provide low-cost housing for seniors.
  • A registered municipality or public body in Canada
  • The UN and any of its agencies

What If You Donate To A US Charity?

A tax treaty between Canada and the United States allowed businesses that make a US income to deduct their contributions to US charities. Such enterprises may take up to 75% of their reported US earnings when submitting their Canadian taxes.

How About Donations In Kind?

Charitable organizations may also receive non-monetary gifts. In this instance, determining the fair market value of such donations can be tough for tax purposes.

However, according to the CRA, a member of the charity or any other individual who has knowledge of the property may estimate its value when it is difficult to determine the fair market value and the gift is not for shares or debt.

Tax Accountant Toronto team state that anyone who is assigned the task of determining the fair market value of a non-monetary gift must be competent and qualified to do so. The CRA advises that if the fair market value of the present is thought to be more than $1,000, you should get it evaluated by a third party.

Tax Accountant Toronto team explains that this implies that you must locate someone who is independent from the organization and who is qualified enough to provide a fair market value of the present.

Deterring Abuse Of The System

There will be times when certain contributors will receive receipts that are far beyond the fair market value of their donations. The CRA is aware of these cases and takes action. When there’s a warning signal, the CRA will come calling, demanding an audit.

If an audit reveals that you made a false claim for a gift donation, it will be rejected. If it is discovered that you exaggerated the value of a present, you may be fined or even lose your tax status. For advice on how to get deductions for charitable donations, contact your income tax lawyer.