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Charitable Tax Credit
The Background
- Donations to charity are deducted directly from taxes (both federal and provincial) in the form of a credit applied directly against taxes payable.
- The federal tax credit on the first $200 is 17% and 29% on the remaining account.
- The provincial tax credit is calculated separately as a percentage of the federal tax credit.
- In Ontario the basic provincial tax rate is 39.5% of the federal tax in 1999.
Therefore, the combined federal and Ontario tax credit is 24% for the first $200 donated to charity and 40% for all donations above that amount.
Benefits
- Your charitable tax credit reduces the amount of federal and provincial income tax that you must pay.
- The system rewards extra giving --the more you give, the larger your tax credit, the less income tax you pay.
Example One
| Federal Tax Credit on first |
$200.00 |
| Calculated at 17% |
34.00 (A) |
| on the remaining |
200.00 |
| Calculated at 29% |
58.00 (B) |
| Total Federal Tax Credit
(A + B) |
$92.00 (C) |
| Provincial Tax Credit |
|
| FTC of $92.00 x 39.5% |
$36.34 (D) |
| Total Federal & Provincial |
|
| Tax Credits (C + D) |
$128.34 (32%) |
- Your donation of $400 actually costs you $271.66 (68%)
Example Two
Total charitable donations of $600 of the year.
- $209.25(35%) is the amount you would deduct from your tax payable.
- You donation of $600 actually costs you $390.75 (65%)
If you have any questions about charitable tax credits or receipts, please email us.
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