Are donations tax deductible?

Inland Revenue Department (IRD) incentivises individuals by allowing a donation tax credit of 33.33 cents in every dollar for cash donations of $5 or more. The tax credit is subject to several caveats, including:

• The cash donation must be made to a charity or organisation that has been approved by the IRD. The approved donee list is updated regularly and can be found here .

• Individuals can only claim on donations up to the value of their income in the tax year they make the donation. Any donation made more than their taxable income will be disallowed..

• Donations that are more than an individual’s income can be split with their spouse or partner up to the value of the spouse’s income.               

• The donation cannot provide any direct benefit to the individual or their family.

• The donation cannot be given, bequeathed, done or appointed by will or made by way of a full or partial debt forgiveness.

• Individuals must keep receipts from the approved charity or organisation as evidence of the cash donation.

Donations to most schools and religious organisations qualify for the donation tax credit. When donating through crowdfunding platforms such as Givealittle, only the donations to organisations that have been approved by the IRD can be claimed for a tax credit.   Givealittle do provide a customised annual tax receipt which you can request via their website which details the donations you have made that are eligible for the donation tax credit.

The tax credits on donations are claimed via an IR526 tax credit form that we prepare as your accountants when we prepare your annual tax return. There is a four-year limit for claiming donation tax credits (i.e. you can submit the donation within four years of 1 April following the end of the tax year you made the donation).

Example 1

Steve makes an annual cash donation of $1,000 to the National Heart Foundation. Steve knows the National Heart Foundation is an IRD approved donee. Steve’s income is $70,000, so he will qualify for a tax credit of $333.33.

Example 2

Ian’s income is $1,000. His wife Janet has an income of $10,000. Ian donates $2,000 to the Royal Forest & Bird Protection Society who he knows is approved as an IRD donee. Because Ian’s income is only $1,000, he can only claim the donation tax credit up to $1,000, so will receive a tax credit of $333.33.   Ian can split the remaining donation amount of $1,000 with Janet. As her income is $10,000, she can claim the remaining $1,000 and also receive a donation tax credit of $333.33.