By saving your receipts you can optimize the tax credit you receive on charitable donations you make to registered charities. You do however, need to have a dependable filing system since you’ll need to hold on to your receipts for a few years.
The first $200 of charitable donations you claim are eligible for a 15% federal tax credit and any amount over that receives a 29% federal tax credit. Where you have some room to make this work to your advantage, without donating more than you would have, is that you do not need to claim your donations in the current year as you can claim up to 5 years later.
So let’s say your total donations in a year are $200. If you claim this amount each year, it would give you a $30 tax credit every year totaling $180 over 6 years. If you were to save all your receipts and file on the 6th year, you would be able to claim $1,200. This would provide a tax credit of $320, $30 on the first $200 and $290 on the remaining $1,000. In this example, by holding your receipts for 6 years, you get an extra $140 back on the total donations. You could max this out a bit more by making extra donations before December 31st of the final year, possibly with the donations you would have made in the following year.
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Tom Drake is the owner and head writer of Canadian Finance Blog.
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Charitable donations aren’t just a good tax break, it’s very important that everyone gives to charity if they can. I always give to children’s charities because I think that a good start in life is vital.