The Canadian tax system offers tax credits for individuals who wish to make donations to charitable organizations.  In the 2013 budget the government of Canada introduced a temporary supplement to encourage additional non-refundable tax credits for first time donors which is called the First Time Donors Super Credit (FDSC).

Under the current system, charitable donations are given a two-tier credit.  The first $200 worth of donations for the year, across all charities, gives an individual a 15 percent federal tax credit which is worth about 25 percent when the provincial tax is taken into account.  Any amounts over the $200 level give an individual a 29 percent federal tax credit, worth about 45 percent when provincial tax is factored in.

The super credit will start in the 2013 tax year and currently is only temporary and will range from the 2013 to 2017 tax years.  This new credit will give an additional 25 percent to the federal rates above.  So for the first $200 individuals would receive the old 15 percent plus another 25 percent worth of credit.  For amounts over the $200, the amount would be the 29 percent plus another 25 percent federal credit.  The maximum contribution available to qualify for the super credit is $1,000.  Any amounts over that will not receive the additional credit.  To be considered a “first time donor” the individual or the individuals spouse or common law partner must not have claimed the charitable donations tax credit in the past 5 years.  If the individual and spouse meet this criterion, the FDSC can be split between the individuals, but cannot exceed a combined amount of $1,000.  Donations to qualify must be made after March 20, 2013 to qualify for this credit.

Clients might consider holding on to charitable donations and not claim in the current year if the amounts are smaller and not as beneficial as if they were over the $200 threshold.  You could combine multiple years and donations from a spouse and claim in one single year to get a larger credit and over the $200 threshold.  If you were planning to make a donation in January, consider pulling into December to increase your pool for the year.  Unclaimed donations can only go back 5 years so make sure you don’t wait too long.  This is a non-refundable credit so it will only reduce tax amounts owed.  If you do not owe any tax you would not want to claim these.  You can claim amounts of donations up to a limit of 75 percent of your net income or for certain certified cultural property or ecologically sensitive land, you may claim up to 100 percent of your net income.  An individual can donate up to 100 percent of net income for the year of death.  Individuals should also look at donations that are not just cash, but shares of publically traded securities, artwork or real-estate.  These have more complex rules around the tax treatment, but often the benefit received is greater than the cost of the items originally and the tax benefit can be more advantageous to the donor.