A great way that small businesses can make an impact in the community is through charitable donations and sponsorship’s. Charities and not-for-profit organizations rely on these funds for their initiatives.
Sponsorship’s are typically written-off as advertising and promotion as they promote your brand, however charitable donations are treated differently if you are incorporated.
For a cash donation given by a non-incorporated business you need to include it as any other individual on a schedule on your personal tax return. This is a non-refundable tax credit at 15% on the first $200 and then 29% thereafter. There is also a first-time donor super credit of an additional 25% on the first $1,000.
For corporations you can deduct cash donations to a registered charity, up to a maximum of 75% of your net income. If you can’t use them in the current year you can carry them forward up to 5 years. Donating through a corporation does have its advantages as you can see.
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