Has anyone ever heard of the First-Time Donor’s Super Credit (FDSC)? I was reading an update from the CRA and came across this interesting & new credit that will help people maximize their tax refund.
What It Is
CRA’s budget for 2013 proposes a temporary, non-refundable ‘super credit’ for first-time donors to charitable organizations that would increase the credit given when a charitable donation is made.
Related: How Does CRA Decide Who to Audit?
For donations up to $1,000 an extra 25% credit is added. This means if you donated $200 or less you would get 40% back as a credit and 54% back for donations between $201 and $1,000.
How Does it Work?
The first-time donor’s credit (‘super credit’) increases the credit you receive when you make a donation up to $1,000 in 2013 by 25%. The credit appears in Schedule 9 of the tax return.
As an example, if someone made a donation of $600 in 2013 their total credit would be:
|First $200 of charitable donations claimed:||$200 x 15% =||$30|
|Charitable donations claimed in excess of $200:||$400 x 29% =||$116|
|First-Time Donor’s Super Credit (NEW):||$600 x 25% =||$150|
This is essentially an incentive by the federal government to encourage Canadians to make more charitable donations.
What is the Fine Print?
The donations need to be made between 2013 and 2017 and can only be claimed once.
As well, the donations need to be cash, not in kind (ie. equities, artwork, real estate, etc).
It does not have to be a one-time donation – if you made monthly or several different donations throughout the year you would still be eligible.
The real catch is that it is only applicable to first-time donors.
According to CRA, someone is considered a ‘first-time donor’ if either the person (or their spouse) hasn’t made a donation and claimed the applicable tax credit for any year after 2007. This is a huge drawback, as most people have made at least one donation in the previous 5 years (and claimed the applicable tax credit).
Also, the donations need to be made after March 20, 2013.
The FDSC can be shared between spouses as long as the total doesn’t exceed $1,000.
How Can I Use It To My Advantage?
The credit can be used to maximize any charitable donations made in the tax years 2013-2017. If you didn’t make any donations in 2013 – you are still in luck as you have another 3 years to make the donations.
My wife and I aren’t eligible because we made some donations in 2012 so we would not qualify as first-time donors, otherwise we would definitely take advantage of this.
To make the most of the credit, you could plan to make the donations (and claim the credit) in years that have a higher income.
If you will have no income in 2014 but a significantly higher income in 2015, it would make sense to wait until 2015 to make the donations.
In the future I am hoping CRA will either increase the credit (%) made for charitable donations or simply expand it to include everyone – not just first time donors.