The federal and provincial governments provide generous tax incentives to encourage individuals to support institutions like the University of British Columbia, but most donors grossly underestimate the true value of these savings. This is partly attributable to the fact that federal and provincial tax credits are calculated separately and not shown as one total amount on an individual’s tax return. This is why we think it would be helpful to explain the mechanics of the charitable donation tax credit.
In BC the charitable donation tax credits are calculated as follows:
- For the first $200 of donations being claimed by a BC tax payer, the combined federal and provincial tax credits total 20.06% (15% federal and 5.06% provincial);
- Any donations exceeding the first $200 on the tax return receive combined federal and provincial tax credits totalling 43.7% (29% federal and 14.7% provincial);
- Tax credits can be used to reduce the amount of tax the donor owes for the year; and,
- The total amount of charitable donations claimed for the calendar year cannot exceed 75% of the net income of the tax payer. If your donations exceed this 75% limit, you can claim the remaining donations on the tax returns during any of the next five years.
To illustrate the tax effects for a BC resident, let’s look at the tax consequences of a $10,000 charitable donation.
Let’s assume that the donor has made other charitable donations totalling more than $200 during 2013 and has sufficient net income on the tax return to be able to claim the full amount of the donation.
If a donor makes a $10,000 gift in 2013 to UBC, then she or he will pay $4,370 less in tax ($10,000 x 43.7%) when filing the tax return in early 2014.
We’re Here to Help
While we recognize tax savings are not the major incentive for supporting the University, they should not be overlooked when contemplating what size of gift might be possible. We are committed to helping you realize all of the tax saving that might be available to you and would be happy to speak with you about your situation and answer any questions you may have. The charitable donation tax credit also applies to gifts by Will and can be a very important tool in reducing taxes owing at death. Please contact UBC Gift & Estate Planning for more information.
To estimate your tax credit visit the Canada Revenue Agency Tax Credit Calculator.
*This information is for general information purposes only and is not intended to be legal or tax advice. Readers should consult with their own tax and legal advisers with respect to their particular circumstances before taking any action based upon the information contained in this web page.