Registered charities perform valuable work in our communities.

Guest post by: Brenda Parker
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Accounting - Beyond the Tax Return - By Brenda Parker

About six years ago, my family decided to sponsor a child in Africa through World Vision. What seems like a small amount of money to us each month makes a world of difference for someone else. We witnessed a transformation in this child's life, going from a seven year old with no schooling in a poor Ethiopian village, to a thirteen year old who is in school learning life skills. We are amazed with the work that World Vision has done for this child and his community. This is only one example of the work carried on by charities throughout Canada and the world.

Registered charities perform valuable work in our communities. Canadians have been very supportive of these organizations. However, with increasing costs and needs these days, charities are feeling the pinch. The government is aware of this need and provides us with various tax incentives to encourage us to give. Donations in the form of cash or gifts in kind made to a registered charity or other qualified donees may reduce your taxes. A list of registered charities is provided on CRA's website. The receipt for your gift should include the value of the consideration given. If you receive something in return such as an event ticket, for example, you must deduct the value of this "advantage", as CRA calls it, from the eligible amount of your donation. The other important thing to keep in mind is that your donation receipt should include the registration number of the charity. Otherwise, it is not an official donation receipt for tax purposes. For those who make charitable donations through their payroll at work, the total for the year will be reported on the T-4. CRA will accept this.

The first $200 which you donate is eligible for a federal tax credit of 15.25% of the donation amount. (based on 2007 rates). The credit will increase to 29% of the amount over $200. A provincial credit is available as well. Generally, you can claim all or part of this amount up to 75% of your net income. There are exceptions for gifts of certified cultural property or ecological sensitive land where the amount claimed can be equal to 100% of your net income. If your net income is insufficient to benefit from your donations, your spouse can claim them on his/her return or you can carry them forward for up to five years. By having just one spouse claim all donations or by carrying them forward, you can benefit from the higher tax credit once the $200 threshold is reached.

Generally, you cannot claim donations made to US charities on your Canadian return. However, if you have US income, you can claim against that income on your Canada income tax. As well, special considerations are made for those who become deceased during the year and leave donations in their wills. If you donate certain types of capital property to a registered charity other than a private foundation, you may be entitled to an inclusion rate of zero on any capital gain realized on such gifts.

Donations can be made in many forms - cash, shares, gifts and so on. Along with the various forms, comes various tax treatments. Check with a professional if you need further advice.

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Accounting - Beyond the Tax Return - By Brenda Parker

About the Author: Brenda Parker

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Brenda Parker operates Scotia Accounting and Tax Services located in Stellarton, NS, Canada. After graduating summa cum laude from St. Mary's University in Halifax with a B Comm in Finance and a BA in Economics, she worked for a national grocery firm in various departments with her last role being assistant manager of Taxation. During this time she attained her Certified General Accountant's designation. Since getting her CGA, she has worked in various management/accounting positions for government ,public accounting firms, and as controller of a regional hotel chain and a new car dealership. She is a Simply Accounting Certified Consultant and Quickbooks partner. In her accounting practice she has served both large and small clients in a wide variety of sectors. From personal taxes to businesses in manufacturing, wholesale, retail and services to charities and not-for-profit organizations. She has clients from Cape Breton Island, NS to Montreal, Quebec to Calgary, Alberta and in many locations in mainland NS. All information in her articles is offered without prejudice and she advises readers to consult a professional accountant in person in regards to their personal situations.

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