The Tax Benefit of Giving to a Registered Charity

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You’re thinking of donating to a charity and you want to make sure that you receive the proper tax benefit. Here’s some tips to help you give wisely.

Giving to a registered vs. a non-registered charity

Only a registered charity can provide you with a receipt for tax purposes, which can help you out at tax time. There are many organizations in Canada working for good causes but not all are registered charities. To obtain registered charity status, an organization must apply to the Canada Revenue Agency (CRA) and satisfy the CRA that its activities are genuinely charitable and that it provides a real benefit to the public, or a significant section of it.

To find out if an organization is a registered charity, you can search for it in the CRA’s List of Charities. You can also call the Charities Directorate at 1-800-267-2384.

Claiming the credit on your tax return

A donation receipt from a registered charity allows you to claim a credit on your income tax return, which can reduce your taxes. Your actual tax savings will depend on the amount of your donation and your level of income.

Registered charities are not required to provide receipts, but they generally do so, as it encourages people to donate. Some have a policy of not giving receipts for smaller donations (less than $20, for example). The charity’s policies regarding receipts should be clearly stated on its website or explained to you when you’re asked to donate. If not, you can ask, before deciding whether to donate.

In order to claim the credit on your tax return, you must ensure that the receipt is made out to your name. If a mistake has been made, the charity can issue a corrected receipt. If you lost your receipt, the charity can provide a replacement. A receipt can be issued for an anonymous donation, but this involves some complicated procedures.

If you received something of value from the charity, you may only get only a partial receipt. For example, if you paid $150 to attend a benefit evening, and the value of the meal served was $50, you are entitled to a donation receipt of $100.

Gifts other than money

It is possible to receive a donation receipt for a non-money gift, for example a gift of property such as land or a painting. The amount indicated on the receipt must reflect the true value of the gift. There are special rules for calculating this. A donation receipt cannot be issued for a gift of services (for example gardening, performing music at an event).

Donating online

As the CRA explains, a charity that asks for donations online should be responsible for protecting your information. You should read the charity’s privacy policy before donating. If you are not sure about donating online, you can ask the charity about other ways to donate. Many charities that accept online donations also issue electronic receipts. There is no problem with this, and the receipt often arrives by email just seconds after the donation was made.

Avoiding Fraudulent Receipts

The CRA warns strongly against participating in donation schemes that promise a tax receipt for an amount higher than what  you actually gave. This is a type of fraud in which an organization takes advantage of its ability to issue receipts. This benefits the promoters and participants, rather than the people the organization is supposed to be helping.

If you suspect any type of fraud by a charity, you can contact the Canadian Anti-Fraud Centre at 1-888-495-8501.