A bit more googling turned up a great summary (for Ontario) that shows that in most cases, it’s more tax-efficient to donate personally:

http://www.stewartkett.com/resources/wp-content/uploads/2009/02/2009-02-01-individual-versus-corporate-donations.pdf

BTW, the small business rate in Alberta is nominally around 15-16%, but this assumes no expenses. Personally my effective tax rate on the company (total taxes paid / total revenue) is around 11%.

Second – any expenses at the corporate level uses pre-personal tax dollars, whereas the personal payments are using after tax dollars – you need to consider the integration impact. Assume you took the money from a corporation (salary or dividend) and then made a personal donation. $100 earned in a corporation would yield you $60 after tax if paid as a salary , assuming a 40% personal tax rate (there would be a deduction for the corporation – so no corporate tax). If that $60 donation was made, there would be a credit of approximately 40% (assuming top marginal tax rate), providing a tax credit of $24 – leaving total tax of $16 and a donation of $60. The remaining $24 would be cash on your tax refund – which would potentailly be re-donated, etc. A similar effect would happen if a dividend was paid, with slightly different tax effects due to the brackets.

Alternatively, in the corporation the full $100 would not be taxed as it would be a deduction from net income for tax purposes. Therefore, the charity would receive the full $100, with no tax implications.

From the above – it’s better to give from the corporation, as the charity gets more money (i.e. the full $100 vs the $60 in the first example), as you do not have to take it out of the corporation and pay. The $100 vs $60 is not exact – the $60 would need to be increased to account for the $24 in cash you are left with, which could be re-donated. That said, the $24 when you cycle it through will end up netting both situations to zero – in both cases you pay no tax if you are in the top marginal bracket.

Of course this assumes the taxpayer is in the top tax bracket and that more than $200 has been donated. For someone in a lower brack, the personal donations are likely better as the tax you pay on the salary would be at a lower rate (say 30%) vs the donation credit at the top marginal rate (say 40%).

Every situation is different and will vary by province and individual.

http://www.cra-arc.gc.ca/E/pub/tg/t4002/t4002-e.html#P594_42484
Looking at T4002: Business and Professional Income from the CRA site, you’ll see in Chapter 3:

“Enter only the business part” means that any of the following are not included as part of your expenses:
…{snip}
donations to charities and political contributions;
..{snip}

So a charitable donation wouldn’t be a tax deduction for the business.

However if you are really involved in the cause that you are donating into in the first place, maybe you wouldn’t care as much about gaining as much as possible from the donation..

Of course, you are allowed to pool contributions from you and your spouse to maximize the benefit.

Cam – I think you might be confused about how the progressive tax brackets work.

I know if I can claim the donation through the business then I save the marginal tax rate (more than 40% for me). From what I recall of tax forms it doesn’t seem like charitable contributions save that much tax – or do they??

In Alberta the situation is even better where the tax credit actually amounts to more than the top tax bracket with a 50% credit. I can’t figure out any way an expense would have a better return than that.

If your charitably minded at all, donations and the resulting tax benefits are a huge bonus. If your seriously charitable you could take the extra tax bonus (especially in Alberta), that would be the amount of tax credit you receive in excess of the tax you would have paid on the amount, and put in into your giving for next year and keep reaping a larger and larger reward each year, both for your chosen charities as well as yourself from the joy of giving. The best part is for those with somewhat limitied incomes thats a great way of increasing your giving without negatively affecting your well-being.

Can any tax people confirm this?

I suspect that donating through the business is a better method.