By now you’re familiar with the Liberal government’s key tax-bracket changes: a cut from 22% to 20.5% for income between \$45,282 and \$90,563, and a new 33% bracket for income over \$200,000. Getting less attention is the way the new brackets impact charitable donations.

Until December 31, 2015, the federal donation non-refundable tax credits for gifts made to registered charities and other qualified donees were as follows:

• Non-refundable tax credit of 15% on first \$200 of total donations
• Non-refundable tax credit of 29% for donations over \$200

So, if your client donated \$20,000 in 2015, his federal non-refundable tax credit would be calculated as follows:

• 15% on first \$200 = \$30
• 29% on donations in excess of \$200 = \$5,742
• Total non-refundable tax credit: \$5,772

Effective January 1, 2016, taxpayers subject to the new 33% tax bracket can take advantage of a new 33% non-refundable tax credit for taxation years beginning 2016.

• Non-refundable tax credit of 15% on the first \$200 of total donations
• Non-refundable tax credit of 33% on the lesser of:
• the amount, if any, by which the individual’s total gifts for the year exceeds \$200, and
• the amount, if any, by which the individual’s taxable income exceeds \$200,000
• Non-refundable tax credit of 29% on total donations for the year above \$200 not eligible for the 33% rate

Here’s how you would calculate the new federal non-refundable tax credit for a client with income of \$215,000 wishing to make a \$20,000 donation for the 2016 taxation year:

• 15% on the first \$200 = \$30
• 33% (\$15,000) on the lesser of
• the amount, if any, by which the individual’s total gifts for the year exceeds \$200, (\$19,800) and
• the amount, if any, by which the individual’s taxable income exceeds \$200,000 (\$15,000) = \$4,950
• Non-refundable tax credit of 29% on total donations for the year above \$200 not eligible for the 33% rate (\$4,800) = \$1,392
• Total non-refundable tax credit: \$6,372

In this example, the difference between 2015 and 2016 is \$600. But the good news doesn’t end there. In addition to the federal non-refundable tax credits, this taxpayer will also be entitled to provincial credits.

It’s important for advisors to be familiar with the donation tax credit calculation. The 33% federal credit may spur more high-income clients to consider philanthropy as part of their overall financial plans. Advisors should also be aware that the new 33% won’t apply to donations made prior to 2016.

Read: Tax tips to help clients maximize refunds