How charitable donations reduce your tax bill in Canada

Giving to a registered charity reduces tax. How it reduces tax depends entirely on who writes the cheque, and that distinction gets glossed over in most articles on the subject.

An individual gets a tax credit, which reduces tax payable. A corporation gets a deduction, which reduces taxable income. Those are different mechanisms with different arithmetic, and the better route for a business owner who could do either depends on numbers specific to them.

The credit for individuals

The personal charitable donation tax credit is calculated in two tiers. A lower rate applies to the first $200 of donations in the year. A higher rate applies to everything above $200. Both the federal government and the province give you a credit, and they stack.

Three things to know about the rates:

1. The federal rate on the first $200 is tied to the lowest personal income tax rate. That rate was reduced partway through 2025 and again for 2026, so the first-$200 credit is now slightly lower than the 15% figure quoted in older material.
2. The federal rate above $200 is 29% for most people, and 33% on donations funded out of income taxed in the top federal bracket.
3. Ontario adds its own credit at its own two rates, and the Ontario surtax can raise the effective provincial benefit for higher-income filers.

Because the first $200 is credited at a lower rate, spouses commonly pool donations on one return so the $200 threshold is crossed once instead of twice. Donations can also be carried forward for up to five years, so holding two years of giving and claiming them together has the same effect.

A worked example, using the rates that applied in 2024

For an Ontario resident donating $1,000 in 2024, when the federal first-tier rate was 15% and Ontario's rates were 5.05% and 11.16%:

So a $1,000 gift reduced that person's tax by roughly $361. The structure still holds. The rates have moved, so confirm the current ones before relying on the exact figure.

Corporate donations work differently

A corporation does not claim the credit. It deducts the donation from taxable income, the same way it deducts any other amount, and the benefit is the donation multiplied by the corporation's tax rate. A CCPC paying tax at a small business rate gets a smaller benefit per dollar than one paying general rates.

The deduction is generally limited to 75% of the corporation's net income for the year, with unused amounts carried forward five years. Individuals face a similar 75% limit.

Which route is better

There is no general answer, and anyone who gives you one without looking at your return is guessing. The comparison turns on:

• The corporation's tax rate on the income the donation would otherwise be taxed at
• The individual's marginal rate, including whether any of the donation would attract the 33% federal tier
• Whether money has to come out of the corporation as salary or dividends to fund a personal gift, and what that costs
• Whether either the individual or the corporation has enough income this year to absorb the donation, given the 75% limits
• Whether the donation is cash or something else, since gifts of publicly traded securities and gifts in kind have their own rules

Two owners with identical incomes can land on opposite answers. It is worth running the numbers once rather than defaulting to whichever account the cheque is easiest to write from. We work through this as part of ordinary personal and corporate tax planning.

Keeping the records

The credit or deduction is only as good as the receipt behind it.

Get an official donation receipt. A registered charity issues receipts with its registration number on them. A thank-you email is not a receipt and will not survive a review.

Check that the organization is actually registered. The CRA maintains a public list of registered charities. Amateur athletic associations, municipalities and a few other qualified donees also issue valid receipts. A GoFundMe campaign, a political contribution and a gift to a foreign organization that is not a qualified donee are each treated differently, and two of those three produce nothing on your return.

Keep them in one place. A folder, physical or digital, per calendar year. Receipts arrive from different organizations at different times and the ones that go missing are usually the small ones from early in the year. Where a corporation is giving, the donation should be coded to its own account rather than buried in advertising or miscellaneous expense, which is a small bookkeeping decision that saves an argument later.

Do a year-end review. Add up what you have given, see whether you are above or below the $200 threshold, and decide whether to claim this year or carry forward. For individuals the donation has to be made by December 31 to be claimable for that year, unlike an RRSP contribution.

The part worth remembering

Donations reduce tax. They do not make giving free. A $1,000 gift that produces a $361 credit still costs $639. That is the right way to think about the decision, and it makes the question of which entity gives, and in which year, worth five minutes of arithmetic before the cheque goes out.

All of our corporate and personal tax work

General information only, current at August 2026. Tax rules change and GST/HST status is fact-specific. Confirm your own position before relying on anything here.