Giving Costs Less Than You Think

10.11.17 | Mission | by John Broadhead

    Giving costs less than you think.

    One of the key indicators of a generous person from biblical principles is someone who sacrifices (Acts 2:45, 2 Cor 8:3), so it sounds funny, even contradictory, to talk about giving “costing” less. But let’s move into the practical world of income and taxes and what it actually costs you when we consider all the benefits.

    In BC, your tax credits for charitable donations above $200 reduce the cost of your gift by almost one-half (43.7%). Federal and provincial government tax incentives encourage individuals to support their favourite charities, but many people grossly underestimate the true value of these incentives, in part because federal and provincial tax credits are calculated separately, not as one total amount on your individual tax return.

    Use this charitable donation tax credit calculator to see just how little it actually costs to give. Let’s explain.

    If you earn a salary: 
    Federal and Provincial income tax is deducted from every paycheck. At the end of the year, the amount of income tax deducted should be equal to what you owe, based on that income. To get some of that money back, you need to have Tax Credits. If you had $8,000 in Income Tax deducted from your pay but had a Tax Credit of $4,500 that you could claim on your tax form, you would get that amount of money back in cash from the government.

    If you have income from other sources (Interest, Tips, Business Revenue, etc.):
    At the end of the year, you will have to pay income tax on those earnings. To reduce the amount of money that you have to pay, you need Tax Credits. If you owe $8,000 in taxes but have a Tax Credit of $4,000, you reduce the amount you owe to the government by that amount. In other words, you get to keep half of what you would owe.

    How is a charitable donation tax credit calculated?**

    For BC residents, all donations after the first $200 get a combined tax credit totalling 43.7% (29% federal and 14.7% provincial) of the amount donated. 

    So here is the tax benefit of a $10,000 charitable donation.

    See the chart below for the net cost to you for larger amounts.**

    As we continue this week through the last step in the Village 2021 Land portion of the campaign, which is the actual gift decision itself, we encourage you to keep this tax credit in mind. This Sunday, October 15 is Pledge Day, when each of us will pledge what God has spoken to us about giving.

    **For simplicity, all of the following examples assume the first $200 has already been given - because it is credited differently.
    The total of charitable donations claimed for the calendar year cannot exceed 75% of your net income. If your donations do exceed this 75% limit, you don’t lose it - just claim the remaining donations on tax returns during any of the next five years.