Charity in the month of Ramadan
Mohammed Yasin, CPA,CGA
5-28-2019
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The parable of those who spend their wealth (charity) in the way of Allah is that of a grain of corn;
It grows seven spikes And each spikes has a hundred grains. Allah gives many fold increase.
To whom he pleases And Allah creates for all and he knows all things” (The Holy Quran 2-261)
Giving money to the poor is an emblem of Islam and a sunna of the Prophet Muhammad (Allah bless him and give him peace). He was never asked for anything, except that he gave it, and he would give without fearing poverty. People said that he was more generous than the “sent wind” that brings the rain clouds.
Every wealthy adult Muslim must give 2.5% of his or her wealth in charity every year. Allah says: "O you who believe! Spend out of what We have given you" (2:254). This is the least charity a Muslim must give every year.
To benefit from the charity you give it is important to keep certain things in mind that will lead to good in this world and the next.
Tax Benefits of Charitable Donations
Canada has a generous tax credit system for donors to charities. The Charitable Donations Tax Credit can be up to 29 percent of the amount you donated at the federal level. You may also be entitled to an additional amount reaching up to 24 percent of your donation depending on your province of residence. There are several of rules that determine whether you qualify.
Claiming and Calculating the Credit
To claim your credit, report it on your annual tax return. As a rule, at the federal level, your credit will be 15 percent of the first $200 of donations and 29 percent of your additional donations. All provinces also have similar credits, which fluctuate between 4 percent and 24 percent. The CRA provides an online tool to calculate your credit, including the provincial component.
Donations From Previous Years
Since the CDTC is greater for donations higher than $200, it may be worthwhile to accumulate donations and claim them all together in the same year. There are two ways to accumulate donations: you can combine them with your spouse`s on a single tax return or you can claim donations from multiple years together in the same year. Donations can be carried forward for up to five years.
If you need to know if you have claimed donations in previous years, you can find out using the CRA's My Account online service. Once you log into your account, click on the tax returns tab at the top of the page. From there, you can view your tax returns from previous years. Look at line 349 of your previous returns to determine whether you have claimed donations for each of the past five years.
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