In December 2015, the Federal Government announced that it would increase the personal income tax rate for top earners in Canada, with corresponding changes to the charitable donation tax credit rates to introduce a top donation tax credit rate of 33%. We previously reported on this change in our Newsletter.
The Budget proposes technical changes to ensure that this increased charitable donation tax credit rate applies to all taxpayers with income that is subject to the new 33% rate, including trusts and graduated rate estates. These changes appear designed to ensure that the 33% donation tax credit rate applies to all income of these taxpayers that is taxed at the highest marginal rate. Trusts that are subject to the 33% rate on all of their taxable income will receive a donation tax credit of 33% on all donations above $200 made after the 2015 taxation year. The measure will also extend the proposed 33% charitable donation tax credit to be available for donations made by a graduated rate estate during a taxation year of the estate that straddles 2015 and 2016.