Canadians give but don’t take [advantage of the tax] credit

Canadians are generous people. The latest available statistics show that in 2010 some 84% of Canadians donated a total of $10.6 billion to charities, an average of $446 each. Their main motivations for giving are to help those in need, to support causes they believe in, and to contribute to their communities.

Governments across Canada provide generous support for people who claim donations against their income tax. The federal tax credit is 15% for donations below $200, and 29% for donations above $200. Combined with provincial tax credits, this significantly reduces the cost of making a donation.

But proportionately, not very many Canadians take advantage of the tax credit. In 2010, only 23.4% claimed the charitable tax credit, down significantly from the almost 30% who did so in 1990.

Most people aren’t motivated to give by the tax credit, so why should it matter whether they claim it, as long as they keep on giving?

Here’s what the tax credit means for someone making that average donation of $446. Depending on where you live, the after-tax cost of that $446 donation ranges from $262 for Quebec residents, to $308 for someone living in Nunavut. If someone is already generous, but wants to do even more, claiming the tax credit means more money in their pocket that they can donate to their favourite cause.

And for people that haven’t been donating, maybe because they think they can’t afford to, or who haven’t been claiming tax credits – the system is even more generous for the next few years. In 2013 the federal government announced the First-Time Donor’s Super Credit, which adds an extra 25% to the charitable tax credit for eligible donors. If someone qualifies, that $446 average donation will actually only cost them anywhere from $151 to $197.

Fewer than one-quarter of Canadians cite the tax credit as a reason for donating, and fewer than one-quarter claim the tax credit. Perhaps they believe that it isn’t appropriate to be “rewarded” for doing good. But seen in a different light, the tax credit is actually a very effective tool to help people who are already supporting their communities, to direct tax dollars that they would have paid into organizations and causes that they believe are having a real impact. To calculate your own charitable tax credit, use this CanadaHelps tax calculator.

The baby boom generation – statistically the most generous donors – is retiring, which means less disposable income for many of them. This, combined with the challenges of engaging younger Canadians who have different ways of expressing their commitment to their communities – not to mention, different financial pressures than previous generations have faced – creates new challenges in ensuring that donations stay at a level that allows charities to make the enormous contributions they do to our communities and quality of life. Thinking more strategically about our giving, and about the impact that tax credits can have on our giving, is a vital piece of the puzzle.