Claiming Charitable Donations on a Final Return in Canada

Many people leave gifts to charity, or give generously in their final year. As executor, you may be able to use those donations to reduce the tax owing on the final return.

This article explains the limits, how gifts made by will are treated, and the carry-back rules. The rules can vary by whether the estate qualifies as a graduated rate estate, so confirm the details with an accountant or lawyer.

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

The limit on the final return

Donations on the final return are limited to 100% of net income on line 23600. Eligible gifts in the year of death plus unclaimed gifts from the prior 5 years count toward the claim.

Any excess can be claimed on the previous year's return, up to 100% of that year's net income.

Gifts made by will or designation

Gifts by will and designation donations are deemed made by the estate, and by the graduated rate estate where conditions are met, at the time property transfers to the donee.

The estate may carry such a gift back to the final return, or to an earlier graduated rate estate year, if the following conditions are met:

• It meets graduated rate estate requirements except the 36-month limit.
• The gift is made within 60 months after death.
• The property was acquired on and as a consequence of death.

GRE status itself ends at 36 months after death.

Donations on a T3 return

Donations cannot be carried forward from a final return to a T3. 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.

Fitting donations with other claims

If you split deductions and credits across the final and optional returns, the total of the claims 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.

Donating can matter where a large capital gain arises from the deemed sale of property at death, since the gain is reported on the final return. How the credit and gain interact depends on the facts.

Filing, deadlines and clearing the estate

The legal representative is usually the executor named in the will (in Québec, the liquidator), and is responsible for ensuring returns are filed and balances owing are resolved.

For a death between January 1 and October 31, the final return and any balance owing are due April 30 of the year following the death. For a death between November 1 and December 31, the final return is due 6 months after the date of death, on the same calendar day. Different dates can apply where the deceased, or a spouse or common-law partner living with them, ran a business. The payment date for a balance owing does not move with the later filing dates.

A T3 return is needed if the estate earns income after death or distributes property to beneficiaries. It is due 90 days after the trust's tax year-end, or after final distribution if the trust ceases to exist.

Before distributing property, the legal representative must obtain a clearance certificate confirming the deceased's amounts have been paid or secured. Distributing without it can make the representative personally liable, up to the value distributed. The certificate is requested only after all returns are filed and assessed, amounts owing are paid or secured, and nothing is outstanding under adjustment, objection, relief or appeal.

What to do next

• Gather official donation receipts for the year of death and unclaimed gifts from the prior 5 years.
• Read the will for gifts to charities and note when property transfers to each charity.
• Calculate net income on line 23600 to see the limit.
• Decide whether to carry any excess back to the previous year.
• Confirm whether the estate qualifies as a graduated rate estate before relying on a carry-back.

An accountant or lawyer can confirm timing, especially for gifts by will.

Frequently asked questions