Those of us in Toronto this morning woke up to… snow! The weather is a picturesque reminder that the holiday season is nearly here. For many, December inspires consideration not only of what gifts to make to family and friends, but also of what gifts to make to charity.
As discussed in earlier blog posts, significant changes will be made the rules surrounding charitable giving in the Income Tax Act (Canada) for the 2016 taxation years and beyond. The CRA was recently asked whether its current administrative practice regarding the allocation of charitable gift tax credits between spouses would be impacted by these changes.
Currently, the CRA allows spouses to allocate the tax credit arising from charitable gifts made by either spouse in a particular year between the spouses’ respective incomes in the manner that is most advantageous to the couple. The credit can be applied against income arising in the taxation year in which the gift is made or any of the five preceding taxation years.
The CRA affirmed that this administrative practice would continue for gifts made prior to 2016 (including this year). It also confirmed that this practice would continue for gifts made in 2016 and subsequent taxation years, provided that the other conditions set out section 118.1 respecting the charitable gift tax credit are met.
This commentary provides additional comfort for couples who rely on charitable giving as part of their tax planning. It also comes as no surprise given the proposed amendment to section 118.1(1) of the Income Tax Act (Canada), effective in 2016, to include in the definition of an individual’s “total charitable gifts” for a particular taxation year gifts made “…by the individual, or the individual’s spouse or common-law partner, in the particular year or any of the five preceding taxation years”. As the technical notes to this amendment state, this change is intended to bring the wording of section 118.1(1) in line with the CRA’s current administrative practice regarding the allocation of charitable gift tax credits between spouses.