July 22, 2015
With the coming Federal Election coming on October 19th, 2015 and for those that give to a political party it is a good time to review thes Political Tax Credits.
A Federal political contribution can be claimed by either spouse (or common law partner), but one contribution receipt cannot be split between spouses. Thus, if you have a spouse and want to contribute more than $400 in one year, it would be beneficial to make two separate contributions for greater flexibility and in maximizing the tax credit so the refund value doesn't drop off. Note that the percentage you get back is higher on the first $400.00 dollars contributed and reduces the more you contribute. So the Federal political contributions cost you more out of your pocket the more you give.
The Canada Elections Act, s. 405, imposes maximum contribution limits for federal political contributions. The amounts indicated in the Act are indexed for inflation. For current limits, see Elections Canada Limits on Contributions. The current limit to each Candidate if $1,500.00 for the calendar year January 1 to December 31, 2015. The maximum the Federail political tax credit provides a credit for only $1,275.00 per annum. So once you go over $1,275.00 no further political tax credit is available. Thus, you and a spouse may want to split the donations.
Federal Political Tax Credit
The credit is calculated as follows: 75% of the first $400, 50% on the next $350 and 33 1/3% of any contribution over $750, up to $1,275. This results in a maximum credit of $650. Some provinces provide similar credits against provincial income taxes for contributions made to provincial political parties.
For Federal purposes, the credit can only reduce taxes paid or payable. Beware that If you are not liable for any taxes in 2015, the credit is lost. It cannot be carried forward to 2016.
Also, note that contributions to local mayoral campaigns do not qualify for the political donation tax credit.
For provincial purposes, tax credits for political donations are also non-refundable, except for Ontario and Nunavut, which provide a refundable tax credit for political contributions.
Please consider spreading your political contributions over two years.
As an example, if you contribute $800.00 in 2015, your federal tax credit will be $491.67.
If, instead, you contribute $400.00 in 2015 and $400.00 in 2016, your political contribution tax credit will be $300.00 in each of 2015 and 2016, for a total of $600.00. So you would receive $108.33 more in refunds by smoothing the donations over 2 years. Also, if you had a spouse doing the same thing, this small tip would save you $108.33 X 2=$216.66.
Ontario Tax credit - individuals
The annual contribution levels and resulting Ontario political contribution tax credits are indexed based on requirements specified in the Elections Finances Act. The formula is:
The maximum yearly Ontario political contribution tax credit is $1,240.00 which is reached when you have made eligible contributions totalling $2,821.00. The tax credit is refundable. This means that if your total amount of tax credits is more than your taxes owing, the Canada Revenue Agency will issue a refund based on the difference. Again, you should consider splitting this credit over 2 years and contributions with a spouse to increase the refunds.
Happy voting and hope this helped keep some more money in your pocket while supporting your political party or politician.
Notice to Reader - Warning and Disclaimer
This monthly update was prepared on July 22, 2015.
When considering any of ideas from this article, please contact the writer directly before acting on them. This will ensure that any information has been updated.
Without contacting the writer before implementing any of these items you will bear all the responsibility for any tax assessments and or business issues that may arise from this information.
Copyright @ 2015