The Canada Revenue Agency (“CRA”) released CRA View 2023-1000021E5, dated January 23, 2024, a technical interpretation in which it considered the donation tax credit and the definition of “total charitable gifts” under subsection 118.1(3) of the Income Tax Act (“ITA”). More specifically, the CRA considered the scenario of where a taxpayer had made a $400 charitable gift to a qualified donee in the 2023 taxation year and sought to claim a portion of the gift in the 2023 taxation year and claim the remainder in the 2024 taxation year.
In its response, the CRA explained that the discretionary non-refundable tax credit set out in subsection 118.1(3) of the ITA is provided to individuals for a taxation year computed by reference to the individual’s total gifts for the year. Subsection 118.1(1) defines “total gifts” for a taxation year by reference to the individual’s “total charitable gifts,” “total cultural gifts” and “total ecological gifts,” all as defined in subsection 118.1(1). Further to this, the CRA stated that subsection 118.1(1) defines an individual’s “total charitable gifts” for a taxation year as being the total of the eligible amount of gifts made to qualified donees by the individual or their spouse or common-law partner in the particular year or any of the five preceding taxation years.
As well, the CRA stated that subsection 118.1(2.1) of the ITA provides that when determining total charitable gifts, no amount in respect of total cultural gifts and total ecological gifts made in a particular taxation year “will be considered to have been included in determining an individual’s charitable donations tax credit until qualifying amounts in respect of such gifts made in preceding taxation years are considered to have been so included.” This means that when determining an individual’s charitable donations tax credits, gifts will be considered to have been claimed on a “first-in, first-out” basis in the order in which they were made.
Therefore, individuals can include charitable gifts from the past five years in their income tax calculations, provided they weren’t previously claimed in prior tax years, subject to the limits outlined in section 118.1 of the ITA.
Ryan M. Prendergast is a partner with Carters.