A gift of cash to Saint Paul’s parish provides immediate funds for use by the church and the donor receives a donation receipt for the donation. This donation receipt can be used to reduce income taxes payable in the year the donation is made and in the next five subsequent taxation years. Because the income tax credit for donations can only reduce taxes payable, care should be taken not to claim more than what can be used in a year to reduce taxes.

In most cases, the maximum donation that can be claimed is equal to 75% of the donor’s net income.

A donation where the income tax credit can be claimed now, in the year the donation is made, reduces current taxes payable as opposed to, for example, a testamentary gift where the credit can only be claimed in the year of death and the preceding taxation year. Not only is the donor reducing current income tax, but also reduces the exposure of unused donation credits.

Example:

Donation: $5,000
Federal & P.E.I. tax credits: $2,243
Net cost of donation: $2,757