Blog Archives

Childrens’ Arts Tax Credit

This video was created by CRA to help people understand the Children’s Arts Tax Credit.

More videos on CRA’s YouTube channel.

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Accounting for the donation of inventory by my business?

How do I account for the donation of inventory by my business?

If your donation is not going to a registered charity (eg a local fundraiser or special event), the only entry you need is to move the COST value of the items from inventory to either a “donations” or “advertising and promotions” account. This is when you will not be receiving an official donation receipt from the recipient.

If your donation is going to a registered charirty who are issuing an official donation receipt, there are two things to consider when you are donating inventory:

1.    Fair market value of the donated inventory

Your business would record a sale equal to the fair market value of the inventory.  By “fair market value” we mean the value of the sale if you had sold it to a customer.

No GST/HST would be recorded as collected or collectable on this sale.

The accounting journal entry would be:

Dr.   Donations
Cr.   Revenue

2.    Cost of the donated inventory

The cost of the inventory donated would be removed from the inventory asset account and added to the cost of goods sold account.

Dr. Cost of goods sold
Cr. Inventory

Please note:

A. A donation of service does not qualify for a charitable donation receipt.  However, if you provide a service to a charity and bill the charity for these services, then you may donate the payment the charity makes back to the charity to receive a donation receipt.

Example: Stan the Painter offers to paint the local drop-in centre. The fair market value of his work is $500. As this is a service, the work is not eligible for a donation receipt. However, he could bill the drop-in centre for the amount, which they would pay. Stan then donates the $500 to the drop-in centre. This donation becomes eligible for a donation receipt.

B. Charitable donations cannot exceed 75% of the businesses’ taxable income.  An incorporated business receives a deduction for the full value of the donation.  An unincorporated business earns a 15% tax credit for donations up to $200 and a 29% tax credit on donations in excess of $200. The unincorporated business’ tax credits are the same as the tax credits that an individual would receive.  This is because an unincorporated business and the owner(s) of the unincorporated business are not separate taxpayers.

For more information please refer to:

IT-297 R2 – Gifts in Kind to Charity and Others

Excise Tax Act S. 123(1) and S. 165

Policy commentary  CPC-017

Medical expenses

Medical expenses in respect to your personal tax return is a huge topic, but there is one basic question that arises during tax time.

What can I claim?

For the most part, most legitimate medical expenses can be claimed on your personal tax return. Keep in mind these are not refundable tax credits, but rather deductions to reduce your taxable income. Also important to note is that the total amount of eligible medical expenses must meet a threshold in order to have an affect on your return. If you don’t have enough receipts to make it worthwhile in a given tax year, you may be able to use these in the following year. CRA allows expenses captured in a twelve month period even if this crosses two taxation years.

You must have the receipts and these must be the actual receipt, not store receipt (eg actual prescription receipt, not the Shoppers Drug Mart receipt).

Each province and territory has its own list of authorized medical practitioners for which you can claim an expense. For example, in BC you can claim the expense incurred for seeing a massage therapist, but you would not be able to do this in the province of Alberta. The full list can be found here.

For detailed information regarding disability tax credits and attendant care expenses, please check CRA’s website.

CRA provides an extensive list of eligible medical expenses on their website.

Items commonly claimed:

Ambulance service to or from a public or licensed private hospital.

Attendant care expenses – see Attendant care or care in an establishment

Dental services paid to a medical practitioner or a dentist. Expenses for purely cosmetic procedures are not eligible. See Which medical expenses are not eligible? for more information.

Laser eye surgery paid to a medical practitioner or a public or licensed private hospital.

Nursing home – see Attendant care or care in an establishment.

Prescription drugs and medications that can lawfully be acquired for use by the patient only if prescribed by a medical practitioner. Also, the drugs or medications must be recorded by a pharmacist. You cannot claim over-the-counter medications, vitamins, or supplements, even if prescribed by a medical practitioner.

Vision devices – including eyeglasses and contact lenses to correct eyesight – prescription required.

Our advice: keep all your receipts throughout the year and bring them with you when filing your personal tax return. We will be happy to help you determine which expenses are eligible for your personal tax return.