March 2017 Newsletter

If you volunteer for a charity, you may be able to make a little money at no cost to the charity.

The charity cannot give you a donation receipt for the services that you provide for free. A valid donation receipt for tax purposes can only be issued for a donation of money or property.

However, suppose the charity pays you for your services and you donate the money back?

If you are not in a high tax bracket (taxable income over $142,353 in 2017), this will pay off. Donations over $200 per year will give you a 29% federal credit plus a provincial credit, for a total savings of 35-50% depending on the province. If you are in a lower bracket, the income you report from the charity will be taxed at a lower rate than the credit you receive. The lower your tax bracket, the higher the differential and thus the more profitable it will be to have the charity pay you.

If you are in Alberta or Nova Scotia, the benefit is even larger. Both of these provinces provide a special 21% provincial tax credit for charitable donations over $200. This makes the total federal/provincial credit worth 50%, even for someone paying a much lower marginal rate of tax.

Of course, the amount the charity pays you for your services must be reasonable, or the charity can run into problems if it is audited by the CRA. Also, if you are a director of the charity (or related to a director), you might not be permitted to be paid by the charity for your services. There are numerous rules, both federal and provincial, that govern charities and their activities.

Last modified on March 15, 2017 12:00 am
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