Donation tax credits can be transferred to your spouse or common-law spouse to reduce the taxes owing on their personal return. It is generally beneficial to combine a married couple’s donations and include them on the highest income spouse’s personal return. The first $200 of donations is credited at the tax rate in the lowest tax bracket on an individual’s tax return. The remainder is credited at either the rate applicable to income in the highest tax bracket or the second-highest tax bracket depending on the income level of the individual claiming the credit. Combining the donations maximizes the credit available as only $200 of donations will be credited at the lowest tax bracket rate. If the donations are split between the returns, $400 will result in a credit at the lowest tax bracket rate.
As a donation tax credit is a non-refundable tax credit, this means that you will not receive a refund if the donation credit can’t be fully used in the year i.e., your taxable income is low and other deductions and credits were sufficient to eliminate your tax owing to CRA. Thus, transferring the credit to a spouse or common-law spouse can be beneficial for your tax planning, or as mentioned in the earlier tax tip, the donation tax credit can be carried forward for 5 years that you can use in the future.
In addition, it is important to note that in order to realize donation credits, the donation must be made to registered charities and other qualified donees specified by the CRA. You may go to the CRA website to check for a list of charities.
Note that you may find donation tax receipts on Quest if you have donated to the university.
- Stephen, Young Tax Professional