Chapter 2: Getting Started
IMPORTANT FOR 2023 / 2024
Changes to taxation in respect of charitable donations
In the federal government’s 2023 budget, changes were proposed to the calculation of alternative minimum tax.
Introduced in 1986 as a way to bring more fairness to the Canadian tax system, Alternative Minimum Tax (AMT) is a parallel tax calculation designed to prevent high-income earners from paying little or no tax.
The new rules reduce the number of high-income earners who will be subject to the tax, but they also increase the tax rate from 15 per cent to 20.5 per cent and reduce deductions for charitable giving.
Before making any donation — especially a large one — you should consult with a tax professional to determine if AMT applies to you and what your best course of action is moving forward.
Additional Learning
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According to the Globe and Mail, the proposed changes raise the exemption from $40,000 to $173,000 and is expected to reduce the number of taxpayers subject to AMT from 70,000 to 26,000. Click here to read the article.
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Of course. Any change to the way taxes are calculated will require a period of adjustment. However, in this case the new rules may lower the incentive for high income earners to make large donations since the tax benefits of doing so will be reduced. Imagine Canada has written commentary on this, which you can read here.
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No. Donations made in 2023 still qualify under the current rules. If you are considering a very large donation, it may be prudent to accelerate your plans and complete the donation in 2023 rather than be subject to the new rules. Consult with a professional to determine the best strategy to generate the most impact in your community.
