By Nizam Shajani, CPA, CA, MBA
We just got out of an election year and you likely got solicited for a contribution. Being aware of the tax advantage of making political contributions may help you in deciding if and how much you wish to contribute to a candidate or party.
Eligible Amount of Contribution
The amount that is eligible for a tax credit is the amount of the political contribution that exceeds the amount of any advantage received. For example, if you donated $200 and received an invitation to a reception that could be valued at $120 in return, the amount that is eligible for the political donation tax credit is $80. This is the amount for which a political party or candidate can issue a receipt. If you receive nothing in return for your contribution, you should receive the full amount on your official political donation receipt.
Who to Donate to?
Political contributions to a registered Federal party or candidate for election to the House of Commons will provide a credit against your federal taxes.
Political contributions to a registered Provincial party or candidate for election to the Legislator will provide a credit against your provincial taxes.
Political contributions to a Municipal candidate for election to the local council is not tax deductible.
Federal Political Donation Tax Credit
You will receive a federal tax credit for federal political contributions follows:
- 75% of the first $400
- 50% of the next $350
- 33% of contributions over $750
The maximum amount of the credit is $650. Therefore, the tax advantage will cap out at a donation of about $1,280.
Provincial (Alberta) Political Donation Tax Credit
Additional credits are available at the provincial level; however provincial donation amounts are only applicable to provincial taxes.
You will receive a provincial tax credit in Alberta for provincial political contributions follows:
- 75% of the first $200
- 50% of the next $900
- 33% of contributions over $1,100
The maximum amount of the credit is $1,000. Therefore, the tax advantage will cap out at a donation of about $2,300.
This information is for discussion purposes only and should not be considered professional advice. There is no guarantee or warrant of information on this site and it should be noted that rules and laws change regularly. You should consult a professional before considering implementing or taking any action based on information on this site. Call our team for a consultation before taking any action. © 2020 Shajani LLP