Chapter 3: Introducing Amy
The charity receives a $5,000 donation
Amy receives a charitable donation tax receipt for the full amount of her donation.
Income tax rates vary by province and territory. As a B.C. resident earning $150,000 per year, Amy will be required to pay approximately 40.7% in income tax. Her income tax has been calculated (all numbers approximate).
When she files her taxes, her donation qualifies her for a tax credit of $2,238.52, which may reduce the amount of taxes she has to pay.
Factoring in the tax credit, the actual after-tax cost of her $5,000 gift is reduced to $2,761.58 (the donation amount less the tax credit).
Additional Learning
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You can follow the example we used with Amy, simply plugging in the tax numbers based on where you live. Or, speak to your accountant or investment advisor. Many charities and even third parties offer online donation calculators. You simply enter your income, where you live, and how much you want to donate, and the system does the rest.
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Canada Revenue Agency publishes the full listing of tax rates by province and territory. You can access that information here.
Amy’s Tax Summary
| Without Donation | With Donation | |
|---|---|---|
| Amy's Net Income | $150,000 | $150,000 |
| Income Tax Payable | $40,700 | $40,700 |
| Charity Receives | $0 | $5,000 |
| Donation Tax Credit | $0 | $2,238 |
| Taxes Owed | $40,700 | $38,462 |
| After-tax cost of donation | $2,762 |
Note: numbers are approximate and have been rounded to simplify the illustration