Taxes on charitable donations
By Lloyd Lindsay | March 30, 2012
Sue asked:
When we donate a sum to a charity do I charge the HST on the full amount of the invoice than subtract the donated amount? For example, the full amount of the job is $1,200, the company donated $600 to the charity event.
Lloyd Lindsay answered:
Charge the full amount of the job plus the GST/HST. The charity then pays you the amount including the GST/HST and you remit the GST/HST to the government at your regular filing date. Next, you would pay $600 to the charity and it would issue you an official charitable receipt. Although your customer might just pay you the net amount consisting of the total price (including the GST/HST) less the $600, you should record the sale and the donation in the manner described above.
Usually, the donated amount is limited to 75 per cent of your net income and the excess can be carried forward over the next five years. Also, whether your business is incorporated or unincorporated determines if your donation is an income deduction or an income tax credit. If your business is incorporated, then the donation is an income deduction. If your business is unincorporated, you cannot deduct the donation as an expense. Instead, you use the amount to calculate your non-refundable income tax credit.