With the holidays around the corner, it’s time to start thinking about whether you should donate to charity this year (if you haven’t already). If you’re in the position to give financially, here’s some information that may help you make your decision.
The Emotional Benefits of Giving
Did you know giving to charity actually makes us happier? Researchers from the University of British Colombia, Simon Fraser University, and Harvard University found a positive relationship between charitable giving and happiness. The source found that how people spend their money affects their happiness, and in particular, people who spend money on others reported greater happiness. The benefits of giving to others are more likely to appear when giving fulfills one or more of our core human needs, which include social connection (connecting with other people), competence (seeing the difference our generous actions have made), and autonomy (having control over the choice to give).
Other emotional benefits of giving include: activating the reward centre in your brain, improving life satisfaction, protecting your community, and reducing stress.
Of course, there are tax benefits too. Any time you make a charitable donation keep your receipts! The cost of your donation is greatly reduced by claiming tax credits on your income tax return.
If you decide to give to charity and are looking to claim your donation come tax time, it’s important to determine which organizations can issue official donation receipts and what types of gifts qualify. Once you know that information, you can decide the total amount of donations you want to claim. According to Canada Revenue Agency, in any one year, you can claim donations made by December 31 of the applicable tax year, any unclaimed donations made in the previous 5 years, and any unclaimed donations made by your spouse or common law partner in the applicable tax year or in the previous 5 years.
The Charitable Donation Tax Credit (DCTC)
In Canada, there are two charitable tax credit rates for both the federal government and the provinces and territories, and any eligible amount donated above $200 qualifies you for a higher rate. Once you know how much you plan on giving, use the charitable donation tax credit rates table to help calculate your charitable tax credit.
The following example from Canada Revenue Agency shows how to use the rate table:
Danielle lives in Saskatchewan and donated $400 in 2013 to registered charities.
- The federal charitable tax credit rate is 15% on the first $200, and 29% on the remaining $200. Therefore, her federal tax credit is $88 ((15% x $200) + (29% x 200))
- The provincial charitable tax credit rates for Saskatchewan for 2013 are 11% on the first $200, and 15% on the remaining $200. Therefore her provincial tax credit is $52 ((11% x $200) + (15% x 200).
- Her combined charitable tax credit is $140 ($88 + $52).
There’s also a First-Time Donor’s Super Credit (FDSC) and you can learn more about it here.
For more information, visit the CRA website. To calculate your charitable donation tax credit, use their charitable donation tax credit calculator.
Of course, giving can be a challenge, especially when money is tight. However, the emotional, psychological, financial and social benefits of charitable giving can often outweigh the gratification of splurging on yourself. Happy giving!