What is the tax benefit of an outright cash gift?
Because a donor receives a donation tax credit for their gift, it is worth more than its actual cost. The federal tax credit is equal to 16 percent of the first $200 of donation receipts plus 29 percent of receipts in excess of $200. Since a federal tax credit also reduces provincial taxes, a donor’s combined tax savings could be nearly half of the contribution made. Here’s an example assuming a combined tax credit of 45 percent. You write a cheque for $1,000 to the Canadian Warplane Heritage but the net cost of the gift to you is only $550, because your donation receipt for $1000 reduces your income taxes for that year by $450. You may claim up to 75 percent of earned income in charitable donations each year. Donations exceeding the limit can be carried forward and claimed on future tax returns for up to five years.
