Claiming Charitable Donations on a Deceased Person's Final Return in Canada

When someone dies who gave to charity, or left a gift in their will, the executor often wonders how that generosity can reduce the tax owing. The answer depends on who made the gift, when it was made and which return is used to claim it.

This article explains the main federal rules for claiming donations on a final return and on the estate's later T3 return. Because the rules turn on details such as whether the estate qualifies as a graduated rate estate, it is worth confirming your situation with a lawyer or accountant before filing.

This article covers Canadian federal tax law, which applies in every province.

The limit on the final return

On the final return, the donation claim is limited to 100% of net income on line 23600. The gifts that count are eligible gifts made in the year of death, plus unclaimed gifts from the prior 5 years.

If the gifts are more than that limit allows, the excess can be claimed on the previous year's return, up to 100% of that year's net income. Donations cannot be carried forward from a final return to a T3.

Gifts by will and designation donations

A gift made through the will, or a designation donation, is not treated as a gift by the deceased. These gifts are deemed made by the estate, and by the graduated rate estate where the conditions are met, at the time the property transfers to the charity.

The estate may carry such a gift back to the final return, or to an earlier graduated rate estate year, if it meets the graduated rate estate requirements except the 36-month limit, the gift is made within 60 months after death, and the property was acquired on and as a consequence of death.

Graduated rate estate status itself ends at 36 months after death. The carry-back rules can also differ depending on when the death occurred, so confirm the rules that apply to the year of death.

Claiming on the estate's T3 return

A T3 return is needed if the estate earns income after death or distributes property to beneficiaries. On a T3 return, the estate's donation claim is limited to 75% of the trust's net income, plus 25% of taxable capital gains and recaptured CCA from the gifted property.

Splitting claims and what is not deductible

Optional returns, such as the rights or things return, may let some claims be split across returns. When deductions and credits are split between the final and optional returns, the total claimed cannot be more than what would have been allowed if only the final return were filed.

Funeral expenses, probate fees and estate administration fees are not deductible. These costs are real, but they do not reduce the tax the way a donation can.

What to do next

• Confirm you are the legal representative and have notified the CRA of your role.
• List every gift made in the year of death and any unclaimed gifts from the prior 5 years, with official receipts.
• Check the will for charitable gifts and any designations, and note when the property will transfer.
• Work out net income on line 23600 to see how much of the limit is used.
• Decide whether any excess should be claimed on the previous year's return.
• Ask a lawyer or accountant whether the estate qualifies as a graduated rate estate before relying on any carry-back.

Before property is distributed to beneficiaries, the legal representative must obtain a clearance certificate, or they may be personally liable. Getting the donation claims right helps make sure the tax position is settled first.

Frequently asked questions