Special Bulletin – Federal Budget 2016
Budget 2016 does not include any new tax incentives for the charitable sector, as has been enjoyed in previous federal budgets.
Feds abandon promise of further CGT exemptions on donations
From a charitable giving perspective, the only development of significance in this budget is the announcement that the federal government will not be implementing a commitment made last year to provide an exemption from capital gains tax related to certain gifts of real estate and private company shares. The previous government had set a plan to begin allowing people to avoid capital gains taxes on private company shares and real estate donated to charities. Morneau’s budget cancels that planned change, eliminating a possible new flow of cash to charities. The decision not to proceed with this exemption is disappointing for the charitable sector.
Charitable donations federal tax credit increases to 33% for trusts
Budget 2016 contains additional amendments to dovetail the changes announced on December 9th 2015, which increase the personal income tax rate for top earners in Canada, and provide corresponding changes to the charitable donation tax credit rates. Top earners have seen an increase of 4% in the tax rate for income over $200,000 to 33% (from 29%), starting January 1, 2016.
So, if your donation exceeds $200 and your income exceeds $200,000 you will qualify for a tax credit rate of 33%. If you don’t qualify, your donation tax credit will stay the previous federal rate of 29%. The 2016 federal budget includes additional amendments to the Income Tax Act to apply the same tax credit to trusts that are subject to the 33% tax rate on all of their taxable income.
Increased funding for charitable and NFP sector
Certain charities will potentially see an increase in revenue thanks to the federal government pledge to spend money on infrastructure in the following ways:
- strategic infrastructure investments at post-secondary institutions
- expanding affordable housing
- investing in arts and culture
- a better future for indigenous peoples