Tax time is coming. Can I claim charitable tax credits for my gifts? (Part 2)
In my previous Legal Matters article on this topic I told you about how much Canadians get behind their charities (to the tune of $15.7 billion annually) but how some contributions to charity (services, directed gifts and pledges) give you less bang for your buck at tax time. This Legal Matters article provides you with three more things to be wary of.
To recap, it all starts with the standard legal definition of a gift. A gift is a voluntary transfer of property without any consideration. That’s pretty simple. As with most things, the devil is in the details. Let’s briefly summarize a few more misconceptions of what a gift is NOT (for tax purposes).
1) Foreign Charities – While a charity can generally carry out its mission anywhere in the world, donors cannot. Donors may only give to charities which have passed muster here with our CRA.
2) Quid Pro Quo Gifts – I borrowed this phrase from Arizona charity lawyer Ellis Carter, who also gave me some of the ideas for these posts. A quid pro quo gift is when a charity provides something of value to a donor in exchange for the gift. That’s okay, but only the amount of the donation that exceeds the value of the goods or services provided to the donor are deductible for tax purposes. CRA refers to this as separating the gift from the advantage.
3) Compulsion – Is your gift fulfilling a contractual obligation or paying some type of penance or restitution because of a court order? Sorry, the gift won’t qualify for tax purposes. It must be made entirely voluntarily.
CRA has a publication that rounds out its interpretation of the definition of a gift which you can find at https://www.canada.ca/en/revenue-agency/services/charities-giving/charities/operating-a-registered-charity/receiving-gifts/what-a-gift.html
. Make sure your philanthropy is strategic.