In 2013, the government decided to give an extra credit to those who are donating for the first time, or hadn’t donated for quite a few years. This was done in order to encourage people to donate to charities, and allow charities to do more for the people, rather than government doing everything for them. At least until 2017, then who knows if this credit will exist at all.
Currently, the non-refundable charitable donations tax credit (CDTC) is calculated as the total of:
- the lowest income tax rate (15% for 2016) multiplied by the first $200 of charitable donations claimed by an individual; and
- the highest income tax rate (33% for 2016) multiplied by the portion of the donations claimed by the individual that exceeds $200.
Starting in the 2013 taxation year, the government introduced a temporary non-refundable First-Time Donor’s Super Credit (FDSC) that will supplement the Charitable Donations Tax Credit (CDTC) for individuals. This new credit effectively adds 25% to the rates used in the calculation of the CDTC for up to $1,000 of monetary (cash) donations. As a result, a first-time donor will be allowed a 40% federal credit for donations of $200 or less, and a 54% federal credit for the portion of donations over $200 but not exceeding $1,000. Only cash donations will be considered for this super credit.
Example 1: You, as an eligible first-time donor, claim $500 of charitable donations in 2013. All of the donations are donations of money. The first-time donor’s FDSC and CDTC would be calculated as follows:
| First $200 of charitable donations claimed: | $200 x 15% = | $30 |
| Charitable donations claimed in excess of $200: | $300 x 33% = | $99 |
| First-Time Donor’s Super Credit: | $500 x 25% = | $125 |
| Total FDSC and CDTC: | $254 | |
Example 2: You, as an eligible first-time donor, claim $700 of charitable donations in 2013. Only $300 of the donations are donations of money. The first-time donor’s FDSC and CDTC would be calculated as follows:
| First $200 of charitable donations claimed: | $200 x 15% = | $30 |
| Charitable donations claimed in excess of $200: | $500 x 33% = | $165 |
| First-Time Donor’s Super Credit: | $300 x 25% = | $75 |
| Total FDSC and CDTC: | $270 | |
As the FDSC is a temporary credit, you can only claim it once from the 2013 to 2017 taxation years. For the purposes of the FDSC, you will be considered a “first-time donor” if neither you nor your spouse or common-law partner (if you have one) has claimed and been allowed a charitable donations tax credit for any year after 2007.
As a first-time donor, the FDSC, along with the corresponding CDTC, may be shared by you and your spouse or common-law partner in a particular taxation year. However, the total amount of donations that may be claimed for the FDSC by both individuals cannot exceed $1,000. When it cannot be agreed on the amount of the credit that each of you will claim, the CRA may apportion the credit.
Do all of my donations qualify for the FDSC? No. Only donations of money that are made after March 20, 2013 will qualify for the FDSC. For taxation years from 2013 to 2017, a new line will be added to Schedule 9, Donations and Gifts to identify the eligible portion of the charitable donations that you have claimed that are donations of money.
If you haven’t made donations for quite some time, now may be that time as this is a time-limited credit. Remember it has to be a cash donation, and only covers those amounts up to $1,000. You can make more donations, than the $1,000, however, the super credit only applies to the first $1,000.
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