Flexibility on Charitable Tax Credit Use
by Arthur B. C Drache

A recent letter to a taxpayer about the use of charitable tax credits highlights both the statutory and administrative flexibility of the use of such credits.[1]           

The question posed was which whether a husband can use his wife's charitable donation carry forward balance. In the situation described the wife reported a charitable gift and used a portion of the eligible amount on her personal tax return in year one and the husband would like to claim the balance of the donation amount on his personal tax return in year two.

This is a fairly common situation where one spouse has retired or otherwise sees a big drop in income while the other still has comparatively high income.

While there is no authority in law for doing so, it is the Canada Revenue Agency's administrative practice to accept gifts made by the spouse or common law partner of that individual as part of an individual's "total charitable gifts" as defined in subsection 118.1(1).[2]

If you are filing a paper return, include your Schedule 9, as well as your official receipts showing either your or your spouse's or common-law partner's name.

You have to claim tax credits for gifts you carried forward from a previous year before you claim tax credits for gifts you give in the current year. If you are claiming a carry forward, attach a note to your return indicating the year of the return with which you submitted the receipt, the portion of the eligible amount you are claiming this year, and the amount you are carrying forward.

Under the Canada Revenue Agency's administrative policy, it is permissible for a charitable donation that was initially reported on one spouse or common-law partner's return to be transferred to the other spouse or common-law partner in a subsequent year.  Taxpayers should provide all the relevant details regarding the transfer with their submitted returns to ensure that the claim is allowed and the carry forward balance is adjusted accordingly.

It is worth pointing out that this provision can be used in the case where a spouse has died. A few years ago the widow of a well-to-do donor who had made very large donations in excess of the annual limits was allowed to use the carry forward of the unused amounts and the CRA had no concerns at all.