How does donating to charity reduce my taxes in Ontario?

Donations to registered charities earn non-refundable tax credits at both the federal and Ontario provincial levels. The federal donation tax credit has two tiers: a lower credit rate on the first $200 of donations in the year and a higher rate on amounts above $200. Ontario has its own corresponding provincial donation credit rates, applied to the same donation amounts.

To claim the credit, you need an official donation receipt from a CRA-registered charity. Donations to non-registered organizations — even if they do charitable work — generally do not qualify. You can claim donations made by either spouse on one return to take maximum advantage of the higher tier (amounts above $200 attract the better rate, so combining donations crosses the threshold sooner).

You can also carry forward unused donation credits for up to five years if you did not claim them in the year of the gift. Donations of publicly listed securities directly to a charity (instead of selling the securities and donating the cash) are especially tax-efficient: the capital gain on the donated securities is exempt from tax, and you still receive the full donation credit. For major gifts of property, a tax professional can help structure the donation to maximize both the tax saving and the charitable impact.