Both the federal and Ontario governments provide non-refundable tax credits to individuals who donate to registered charities. These credits reduce the amount of tax payable but cannot generate a refund on their own.
The maximum amount of donations that can be claimed in a given year is 75% of net income. Unused donations can either be carried forward for up to five years or transferred to a spouse.
Unlike most non-refundable credits, charitable donation credits are calculated using two different rates:
A lower rate applies to the first $200 of donations.
A higher rate applies to amounts above $200.
Donation of property:
When property (such as artwork or company shares) is donated instead of cash, the charity issues a tax receipt for the property’s fair market value. If the property was acquired for less than this value, the donor will have realized a capital gain. In such cases, the tax reporting is more complex. UFile requires special handling for these situations, which are not covered in this document.
Federal credit calculation:
15% on the first $200 of donations
29% on the amount over $200
Example: For $500 in donations, the federal credit is $117 (15% × $200 + 29% × $300).
Ontario credit calculation:
5.05% on the first $200 of donations
11.16% on the amount over $200
Example: For $500 in donations, the Ontario credit is $43.58 (5.05% × $200 + 11.16% × $300).
Carrying forward:
Donations can be carried forward for up to five years. This may be advantageous for individuals who donate regularly, as grouping several years’ worth of donations into one year can increase the overall credit.
Example of Carrying Forward A person donates $500 annually for six years (2024–2029).
If claimed each year: Total federal credit = $702 [(6 × 15% × $200) + (6 × 29% × $300)]
If carried forward and claimed all in 2029: Total federal credit = $842 [15% × $200 + 29% × ($300 + (5 × $500))]
Transferring the credit to a spouse:
Donation amounts can be transferred between spouses. This may be beneficial in two situations:
One spouse owes little or no tax and cannot fully use their donation credit.
Combining donations under one spouse increases the total credit, since the lower 15% rate applies only once to the first $200 of donations (rather than once per spouse).
Example: One Spouse Claiming All Donations
Two spouses each donate $500 in the same year.
If each spouse claims their own $500 donation, the combined federal credit is $234 [2 × (15% × $200 + 29% × $300)].
If one spouse claims both donations, the federal credit is $262 [(15% × $200) + (29% × $800)].
Handling in UFile:
Carrying forward: If a donation is intended to be carried forward, it does not need to be entered into UFile. The CRA does not track unused donations, so it is the taxpayer’s responsibility to retain the information.
When entered but unused: If a donation is entered in UFile but not used (e.g., because there is no tax payable), UFile will include it in the Summary of Carryforward Amounts. This report, along with the Schedule of Charitable Donations, should be printed and provided to the client, who should bring it to their next year’s tax preparer.
Donation entry: UFile has separate fields for current-year donations and for carryforward amounts from prior years.
Spousal returns: If preparing tax returns for both spouses, UFile will automatically transfer donations between them to optimize the overall credit. If some of the donations cannot be used in the current year, UFile will show the balance in the printable Summary of Carryforward Amounts.