As political donations made towards political parties has been known to be a great way for Canadian citizens to become more involved in provincial and federal politics, the question remains, whether one would receive any tax credit for such contributions. Accountants of Toronto suggest that residents could in fact receive tax credits for such political donations, and that the credit is calculated in a set method.
For political donations, in 2015, Toronto accountants advise that the tax credit would be calculated as 75% of the first $400 spent in political donations. In relation to the next $350 donated above the initial $400, the percentage for tax credit is reduced to 50% of this amount. Additionally, for any contribution made as political donations above the amount of $750, up to the amount of $1275, the percentage of tax credit would be reduced to 33 and one-third percent.
It is critical to note that in order to optimize the benefits of the political donations tax credit, for those individuals intending on making a political donation, would find it beneficial if the donation were to be done over the course of separate years. For example, Toronto accountants calculate that an individual that would make a political donation for the amount of $600 in the year 2015, would receive a political donation tax credit of $400 for the year.
($400*.75) + ($200*.5) = $400
However, if the political donation was distributed over the years, with the initial $400 donated in one year, and the additional $200 donated in the following year, the individual would perceive a larger political donation tax credit, which is of $450, for the year.
($400*.75) + ($200*.75) = $450.
In the provincial setting, Toronto Accountants state that some provinces in fact have similar credit policies and calculation methods as mentioned above, eligible to offset any provincial income taxes, for political donations made towards provincial political parties. Moreover, with the exception of the provinces of Ontario and Nunavut, provincial tax credits for political donations is non-refundable. In the cases of political donations made in Ontario and Nunavut, Accountants of Toronto state that the tax credits for political donations are in fact refundable. Moreover, Toronto Accountants state that local mayoral campaigns do not qualify for a political donation tax credit.
Although it is slightly a simpler process to receive tax credits for political donations, receiving federal tax credits for political donations is slightly more difficult to attain. A federal tax credit for political donations could be used to reduce taxes paid, or taxes payable. However, if one is not accountable for any taxes for a said year, the tax credit that an individual was initially eligible for is essentially lost. Additionally, Toronto Accountants state that the lost tax credit cannot be carried forward to the next year, and thus, the tax credit is unable to be recovered.
SRJ Chartered Accountants who have offices in Mississauga and Toronto have advised many of our clients regarding the personal tax credits availabale to them. We also work virtually with our clients from all over Canada and globally. If you are interested in determining if your contribution to a political party is tax deductible please contact us directly by email (firstname.lastname@example.org) or by calling our office (647-725-2537).