With December just around the corner and holiday gift buying in full swing, what better time to consider making that charitable donation to help those less fortunate and to ensure you reap the tax benefits for 2012.
To claim your donation and get some money back when you file your 2012 personal income tax return next spring, you need to ensure your donation is made prior to midnight on Dec. 31. But you soon may have a bit more time to make that donation.
A private member's bill introduced by Kitchener-Waterloo MP Peter Braid last month proposes to extend the tax deadline so that eligible donations made in the first 60 days of the following calendar year can be claimed in the previous calendar year. This would mimic the normal March 1 (Feb. 29 in leap years) RRSP contribution deadline Canadians have to contribute and claim a deduction when filing their prior year's taxes.
"Moving the deadline for charitable donations to the tax preparation season in February will increase awareness of the tax benefits that are available when contributing to charities, and provide an incentive to increase donations in order to ensure a larger tax credit," Mr. Braid in a news release.
Mr. Braid says our current tax deadline of Dec. 31 "falls during the busy holiday season, when Canadians are not usually focused on strategic financial planning. In addition, many families have financial constraints at this time, and are unable to maximize their donations in order to provide a greater charitable tax credit."
Canada's tax system provides a federal non-refundable donation tax credit equal to 15% on the first $200 in annual donations, with a 29% credit on anything above that. Provincial or territorial credits can increase the total combined value of the donation tax credit to as high as 50%.
Imagine sitting down at your computer to prepare your tax return in early February 2013, only to realize that you owe a few hundred dollars in tax on that capital gain you realized in 2012. What if you could, with a few mouse clicks, make an online donation to the charity of your choice, generating an instant electronic tax receipt that you could immediately enter into your tax preparation software package. Voila, presto! You've eliminated your tax owing and maybe even generated a small refund.
The stimulus for Mr. Braid's Bill C-458 stems from a submission made to the standing committee on finance in February by Ottawa charity lawyers Arthur Drache, a former tax columnist for the Financial Post, and Adam Aptowitzer.
"The RRSP season, taking place in February, allows people to make contributions with full knowledge of their income from the previous year," Mr. Aptowitzer says. He says such a change would essentially create two charitable giving "seasons," the first being the usual December period and the second would be a tax-motivated end of February season.
Jamie Golombek is the managing director, tax & estate planning at CIBC Private Wealth Management in Toronto.
© Copyright 2013