From the outset, humans are inherently good and often wish to extend a helping hand when encountering individuals or situations that require assistance. One direct method to help is through donations. IRD offers certain tax benefits for such philanthropic actions. This article will introduce the details regarding Donation Tax Credits.
As a donor, you can claim 33.33 cents for every dollar you donated to approved charities and organizations. However, you can only claim on donations that add up to the same amount or less than your taxable income during the tax year.
You will need to eligible for all of the following situations:
– Claiming as an individual and not on behalf of a trust, partnership or company.
– Having taxable income during the tax year of claiming a donation.
– Being a New Zealand tax resident at any point during the respective tax year.
You can claim donation tax credits when your donations are $5 or more and meet the following criteria:
– Donations are to approved charities or organizations.
– No direct benefits have been provided to you or your family from the donation.
– The donation isn’t given through a will, specified in a debt forgiveness, either partially or fully.
Approved donee organizations
You can find the approved charities and donee organizations from IRD’s official site as following link:
https://www.ird.govt.nz/income-tax/income-tax-for-individuals/individual-tax-credits/tax-credits-for-donations
Go to “Approved donee organizations” to check if you can claim tax credits for your donations as in the following picture.
Donations to schools
You can claim for donations to most schools and parent-teacher associations, but you cannot claim for:
– Tuition fees
– Private school fees
– Exam fees
– Attendance dues
– Tertiary education fees
– Parent-teacher association membership fees
– Costs for attending volunteer activities which is not part of school programs
– Costs of materials created and brought home from school, like woodwork projects.
What needs to be on donation receipts
You need a receipt for every donation you want to claim. The receipt needs to:
– be in your name, or your spouse or partner’s name
– show the amount and date of the donation
– clearly state that it’s for a donation
– be signed by an authorized person
– be on the organization’s letterhead or show its name and official stamp
– show the organization’s IRD number or registration number with Charities Services
– show the word ‘copy’ or ‘replacement’ if it’s a replacement receipt.
Four-year time limit for claiming
For a donation you made, you can submit the receipt at any time within 4 years of:
– 1 April, following the end of the tax year in which you made the donation, if you have an early or standard balance date
– the day after the end of your income year, corresponding to the tax year in which you made the donation, if you have a late balance date.
You can claim the lesser of the following in a tax year:
– 33% of the total donation amount
– 33% of the taxable income
If your donation exceeds your taxable income, it is possible to share the donation with your spouse or partner. Your spouse or partner also can claim up to their amount of taxable income.
Splitting donations with your spouse or partner
When you submit your donation receipt in myIR, you can let IRD know how much of it you want to give to your spouse or partner. IRD will transfer the donation amount to your spouse or partner directly. They do not need to submit the receipt by themselves. You can do this even if the receipt is in your name only.
You can ask your employer to deduct donations from your pay and pass them on to approved charities or organizations, which is payroll giving.
For every dollar you donate, you get 33.33 cents back as a tax credit. The credit reduces the amount of PAYE or withholding tax you pay.
In conclusion,it is evident that this provision by IRD serves to encourage altruistic actions. To avail of the tax credits, ensure your donations are directed towards regularized and approved charities or organizations. However, it is essential to donate with a kind heart, not just for the tax benefits. After all, not all charitable donations qualify for tax credits.
Please feel free to contact us, if you have any questions regarding accounting or taxation.
