NZF Canada – Tax FAQs

Year-End Giving FAQs: Everything You Need to Know About Charity Donations, Taxes, and Zakat with NZF Canada

As the year comes to a close, many Canadians reflect on how to give back to their communities while also planning their year-end finances. Whether you’re fulfilling your Zakat or contributing Sadaqah, understanding how charitable giving interacts with Canada’s tax system can help you make the most of your generosity.

To help you navigate the details, NZF Canada has gathered some of the most common questions about charity, tax credits, and donation options.

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Does claiming a tax receipt cancel the reward of my Zakat or Sadaqah?

Not at all. The reward for Zakat and Sadaqah lies in your intention and sincerity.

The Qur’an highlights this principle:

“We feed you only for the sake of Allah.” (Qur’an, 76:9)

This verse emphasizes that giving with the right intention, is an act of worship done solely for Allah’s pleasure. Claiming a charitable tax credit simply means you are following Canada’s legal framework, and does not diminish your reward in any way, Insha'Allah.

In fact, some donors choose to reinvest their tax savings back into new charitable contributions, further increasing their community's impact.

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How does charitable giving affect your tax return?

When you donate to a registered Canadian charity, like the National Zakat Foundation Canada, you become eligible for a non-refundable tax credit, which helps reduce the amount of income tax you owe to the Canada Revenue Agency (CRA). A donation receipt can be issued for contributions of $20 or more, enabling you to claim this benefit when filing your annual return.

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Key benefits

• Lower tax bill: Credits reduce the actual tax you owe, rather than just lowering your taxable income. (Government of Canada)
• First-Time Donor Super Credit: An extra incentive that has provided an additional federal credit on eligible first-time cash donations, boosting the overall value of your charitable tax relief. (Government of Canada)
• Carry-forward: If you do not use all your donation credits in the year of giving, you can generally carry forward the unused portion for up to 5 years to claim later. (Department of Finance Canada)
• Spousal pooling: You can combine donations with your spouse or common-law partner and have them claim on one return to maximize the higher credit rates and simplify record-keeping. (Canadian Charity Law)
• Non-cash gifts: Donating qualifying securities or certain types of property can offer additional advantages, such as potentially avoiding capital gains tax on appreciated investments while still receiving a donation receipt. (Intuit Inc.)

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How are non-refundable tax credits calculated?

The Canadian tax system has two federal credit rates for charitable contributions:

• First $200 donated: 15% credit
• Donations above $200: 29% credit

Each province also offers its own additional tax credit rates, meaning your total benefit varies depending on where you live. For example, provincial credits in Ontario differ from those in Quebec or British Columbia.

Combined, federal and provincial credits can offer a meaningful reduction in your tax payable—especially for larger donations. For accurate calculations, keep your official receipts organized and consider consulting a qualified tax advisor familiar with charitable giving rules.

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Is the end of the year the best time to donate?

Yes, there are several practical and emotional benefits to giving at year-end:

1. Tax efficiency. Donations made before December 31 can be claimed on your current year’s tax return, helping you lower your taxable income right away.

2. Community impact. Your gift ensures more families receive support during the winter months when financial struggles can be most severe.

3. Personal fulfillment. Ending the year with an act of generosity is a powerful way to express gratitude and compassion.

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What are the different ways I can donate?

You can contribute through stocks, securities, e-transfers, or cheque, offering flexibility for both personal and business donors. Learn more or make your donation at nzfcanada.com/donate. (Government of Canada)

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Digital and cash-based options

• E-transfer: Send an e-transfer directly to NZF Canada by following the instructions on the donate page, which is convenient for quick personal donations.
• Cheque: Mail or drop off a cheque if you prefer paper-based giving or donate on behalf of a business or organization.

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Investments and zakat resources

• Stocks and securities: You can donate eligible stocks or securities, and NZF Canada also provides FAQs to help you calculate zakat on shares and investment portfolios.(NZF Canada)
• Registered accounts: For guidance on how to calculate zakat on RRSPs, TFSAs, and other registered investment accounts, refer to our detailed FAQ resources. (NZF Canada)

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Can I direct my donation to a specific person or family?

Yes. If you want to support a particular NZF Canada applicant or family, email  donorcare@nzfcanada.com. The NZF team can verify and facilitate your contribution through a transparent process. (Note: timing may vary depending on the funding cycle.)

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Final thoughts

Year-end giving offers a rare opportunity to meet both spiritual and financial goals. By understanding how your donations interact with Canada’s tax system, you can maximize your impact while fulfilling your obligations with sincerity.

May your giving bring blessings, ease, and reward—both in this world and the next.