How a $550 donation can become $3,000: Thanks to tax credit

National Post

2005-01-10



Tomorrow, Jan. 11, is the deadline to make a donation to the tsunami relief
effort and still be entitled to claim that donation on your 2004 tax return.

Last week, Minister of Finance Ralph Goodale and Minister of National Revenue
John McCallum jointly announced, as part of the government's package of tsunami
relief assistance efforts, that individuals, if they so choose, can have
charitable donations made to the tsunami relief effort from Jan. 1 to 11
considered as having been made during the 2004 taxation year.

Donations eligible for this extension must be made by cash, cheque, money
order or credit card. They must be directed exclusively towards the tsunami
relief efforts and must be made to eligible registered charities involved in the
relief effort.

A list of eligible registered charities can be found on the Canadian
International Development Agency (CIDA) Web site, www.acdi-cida.gc.ca, or by
calling the CIDA information line at 800-230-6349. These charities include the
Canadian Red Cross, CARE Canada, OXFAM, World Vision, UNICEF, Doctors Without
Borders and Save the Children.

In addition, last week Aileen Carroll, Minister of International Cooperation,
also announced that the Government of Canada will match, on a one-to-one basis,
donations from Canadians to the tsunami relief efforts. "By matching donations,
I hope that Canadians will give even more to help the victims of this
unprecedented disaster," Ms. Carroll said. There is no ceiling on the amount of
donations the government will match.

Donations will be matched retroactive to Dec. 26, the date of the earthquake
and tsunamis. The program will be reassessed following the UN donors'
conference, which is scheduled for tomorrow.

Some readers may recall that this is not the first time that the normal Dec.
31 donation deadline has been extended due to unforeseen circumstances. In
December, 1997, the government extended the donation deadline for making 1997
charitable donations to Jan. 31, 1998, in order to allow more time for Canadian
charities to pursue campaign drives that were hurt by the 1997 postal strike.

Finally, when making your donation, don't ignore the value of the donation
tax credit, which can be substantial. Assuming that you already made at least
$200 of donations in 2004, you can expect a tax refund of at least 40% on any
donation you make above the $200 limit, depending on your province.

Let's take the example of Natasha, a B.C. resident who contributes $1,000 to
the tsunami relief effort. Assuming she has already contributed $200 to other
charities in 2004, she would be entitled to a tax credit of nearly $450 on her
2004 return, regardless of her income level and associated tax bracket. This
holds true because the tax relief for donations is a credit as opposed to a
deduction, so it is worth virtually the same for everyone, no matter what tax
bracket you are in.

If Natasha's employer has a matching program, combined with the government's
matching program, a total of $3,000 will go to the tsunami victims at a cost to
Natasha of only $550 -- more than a five-fold benefit.

To borrow a line from last year's Tony-award winning Broadway musical Avenue
Q, "When you help others, you can't help helping yourself."