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Donating to Charity - What is Your Reason?in KD Professional Accounting Services News
I have a lot of different perspectives on donating to charity, some you will agree with, some you won’t, but all are equally valid and should be considered when you are making your decision on whether to give to charity or not.
I believe that no financial decision should be made based solely on tax consequences. Giving to charity in my opinion is a very, very good thing to do (provided the charity is actually making the world a better place and not just paying executives a lot of money to work there). You even get a really good tax credit for making charitable donations. The problem with any tax strategy is that you are giving away $1 to save a percentage. In short if you give $1 to charity then you will save approximately 40 cents in tax (in AB). This is why motivation and knowledge are important. From a purely financial perspective if you are worried about being able to pay your taxes and other expenses then giving to charity is not the right move for you. In a case like this you are better to keep your money and pay the taxes.
The other side of the coin is what you believe in. If you believe that others need your financial help, that God is calling you to step up, you feel you have been blessed and want to share your good fortune with others, then donating to charity is a good way to start. The next thing you need to consider is any other motives that you have. Some people really don’t care about the tax deduction because they are motivated by a true sense of caring and kindness, while others that care also view the tax deduction as very important. Regardless of how important you think the tax deduction is I recommend that you ensure you get a proper receipt. The tax deduction may not be your primary motivation, but there is no point in giving the government more of your money. Look at it this way by getting the tax deduction you will have more money to give to charity next year, and the year after. Don’t give it to the government.
Here is a Court case that shows what happens when you don’t get a proper donation receipt.Lapointe v. The Queen. Tax Court of Canada (Official English Translation), December 5, 2014. Neutral Cite: 2014 TCC 356. Court File No. 2013-3318(IT)I. Favreau J. Charitable donations tax credits — Whether donation receipts submitted by taxpayer met prescribed requirements — In reassessing the taxpayer for 2011, the Minister disallowed the donation tax credits claimed on the grounds that: (a) the taxpayer was unable to prove that he had made the alleged cash donations to the registered charity involved (the “Charity”); and (b) the donations receipts submitted did not meet the requirements prescribed in sections 3500 and 3501 of the Regulations. In dismissing the taxpayer’s appeal, the TCC concluded that: (a) the taxpayer was acting in good faith and did incur charitable donation expenses in connection with such things as books and school uniforms purchased for a school in Haiti being operated by the Charity; (b) the donation receipts submitted by the taxpayer, however, did not contain prescribed information such as the registration number of the Charity; and (c) the Minister’s reassessment, therefore, was justified. — ITA s. 118.1(2); Income Tax Regulations C.R.C. 1978 c. 945, ss. 3500, 3501.
If you have any questions about donations or if you'd like to see how donations fit ino your tax planning, don't hesitate to contact us!