Where Does Your Donation Actually Go? Fundraising Costs, Tax Credits, and How to Pick a Charity Worth Supporting

People ask you for donations all the time. At work. At the checkout counter ("would you like to round up today?"). On the street, from someone in a branded vest with a clipboard. At your front door. On the phone during dinner.

All of this is fundraising, and it costs money. Canvassers get paid, often by third-party firms that charities hire. Call centres cost money. So do mailers, gala dinners, and the donor databases that make sure you hear from a charity again. Every dollar spent on asking is a dollar that doesn't reach the cause.

I thought about this recently when a charity I had donated to years ago started calling me over and over. One donation, and now I was a lead in their pipeline. That made me wonder how much of what I gave actually reached the people it was meant to help, and how much went into finding the next donor (me, again).

Fundraising is only one of the costs a charity carries. There's also administration like rent, accounting, executive salaries, audits. Then there's the tax side. Donations get you a tax credit in Canada, and the size of that credit depends on how and when you give.

This post covers all of it:

• How the donation tax credit works in 2026, and a few ways to get more out of it
• How to find a charity's real fundraising and admin costs, for free, in about ten minutes
• What those numbers do and don't tell you
• A checklist for choosing a charity
• How to make the phone calls stop

How donations affect your taxes

First off - it is a credit, not a deduction!

In Canada, donating to a registered charity gets you a non-refundable tax credit. It lowers the tax you owe, but it won't create a refund if you don't owe tax. (If you've read US content about "deductions," "itemizing," or the new 2026 US rules, none of that applies here.)

The credit has two tiers, and the tiers matter a lot:

Federal (2026):

• 14% on the first $200 of donations in a year. The lowest personal income tax rate was reduced to 14.5% for 2025 and 14% for 2026, and this is the rate used for the first $200 of donations. Many older articles still say 15%.
• 29% on everything above $200
• 33% on donations above $200, to the extent your income is in the top federal bracket. The top federal rate starts at $258,482 of taxable income in 2026.

Provincial - every province adds its own credit on top. In Ontario, the provincial credit is 5.05% on the first $200 and 11.16% above, which puts the combined federal and Ontario rate on amounts above $200 at roughly 40.16%. Once Ontario's surtaxes apply at higher incomes, the combined credit gets closer to 46%.

The takeaway - the first $200 you give in a year is the least tax-efficient part of your giving, and every dollar after it earns roughly twice as much back.

A worked example (Ontario, $80,000 income, $500 donation)

The $500 donation costs you about $341 after tax. You're still out of pocket, and that's how it should be. A donation is a gift that the tax system partly subsidizes. It is not a way to make money.

Four ways to get more out of the credit

1. Bundle your donations. You don't have to claim a donation in the year you make it. Donations can be carried forward for up to 5 years, so you can save a few years of receipts and claim them together. That way you only pay the low first-tier rate once instead of every year.

Say you give $200 a year for five years (Ontario, same income as above):

• Claimed each year: 5 × $38.10 = $190.50
• Claimed together in year five: $38.10 + ($800 × 40.16%) = $359.38

Same donations, about $169 more in credits.

2. Pool donations with your spouse. The CRA lets either spouse claim all of a couple's donations on their own return, no matter who actually made the donation. Combining receipts gets you past the $200 threshold faster. Watch that the claiming spouse actually owes enough tax to use a non-refundable credit. In most provinces the rates are flat, so it usually doesn't matter which spouse claims. It does matter if one of you is in the top federal bracket (33%) or subject to Ontario surtax.

3. Donate investments instead of cash. If you hold stocks or ETFs with large unrealized gains in a non-registered account, you can transfer them to the charity directly instead of selling them and donating the proceeds. Donating publicly traded stocks, mutual funds, or ETFs directly to a registered charity gives a 0% capital gains inclusion rate on the accrued gain, so you pay no capital gains tax, and you still get a receipt for the full fair market value. Two caveats - this only makes sense for non-registered holdings (TFSA and RRSP assets don't have capital gains tax to avoid), and the charity has to be set up to accept securities. Most large charities are, and platforms like CanadaHelps can handle it for smaller ones.

4. Know the ceiling. You can claim eligible donations of up to 75% of your net income in the year of the gift, and unused amounts carry forward for up to 5 years. Most people never get near that, but it matters if you're planning a large one-time gift.

What doesn't count

• Donations to organizations that aren't registered charities or other qualified donees (GoFundMe campaigns for individuals, most non-profits, political parties, which have their own separate credit)
• The value of anything you get back. If a gala ticket costs $250 and includes a $100 dinner, your receipt should be for $150.
• Anything without an official donation receipt showing the charity's registration number

Claims go on Schedule 9 of your return. Keep your receipts, because the CRA can ask for them.

Where does the money actually go?

A charity's spending falls roughly into three buckets:

1. Charitable programs - the work you actually want to fund
2. Fundraising - canvassers, telemarketing, mail campaigns, events, donor-management software, the firm that keeps calling you
3. Management and administration - finance, HR, audits, rent, leadership

Buckets 2 and 3 together are "overhead." Neither is bad in itself. A charity with no accountant is a charity you shouldn't trust with your money. The question is whether the overhead is reasonable.

What the CRA considers reasonable

The CRA's fundraising guidance uses a fundraising ratio. It adds a charity's receipted donations and other fundraising revenue from its annual T3010 return, then divides fundraising expenses by that total.

• Under 35%, the ratio is unlikely to raise questions or concerns from the CRA.
• At 35% and above, the CRA looks at the average over recent years to see whether there's a pattern of high fundraising costs, and the higher the ratio, the more likely it is to be concerned.
• Above 70% is a red flag, and the CRA requires a detailed explanation and justification.

Think about what that means. A charity can spend 34 cents of every dollar it raises on raising more money and stay comfortably clear of regulatory attention. That's before admin costs.

This isn't hypothetical. When Charity Intelligence Canada reviewed Canada's top 100 charities, it found that 14% of them exceeded the CRA's guideline by spending more than 35% of donations on fundraising, with some spending as much as 50%.

How to look up any charity's numbers yourself

Every registered charity files a T3010 information return with the CRA every year, and much of it is public.

1. Go to the CRA's List of charities (search "CRA charities listing" or go through canada.ca).
2. Search for the charity by name. Confirm it's listed as Registered, and note its business number.
3. Open the most recent return and look at the financial summary. You'll see total revenue split into receipted donations, government funding, and other sources, plus expenditures split into charitable programs, management and administration, and fundraising. It also shows staff compensation ranges.
4. Do the math:
   • Fundraising ratio = fundraising expenses ÷ (receipted donations + other fundraising revenue)
   • Admin ratio = management and admin ÷ total expenditures
5. Look at three years, not one. A single bad year can be a building project or a new campaign. Three bad years is a pattern.

The shortcut - Charity Intelligence Canada

If you don't want to dig through filings, Charity Intelligence (charityintelligence.ca) does it for you for hundreds of larger Canadian charities. Its star ratings are based on five things - donor reporting, financial transparency, funding need, cents to the cause, and demonstrated impact.

"Cents to the cause" is the easiest to read. It's 100% minus the fundraising ratio minus the administrative cost ratio. Below 65 cents, Ci warns donors the charity may not be operating efficiently, and below 50 cents it flags a stronger warning.

For reference, Ci's Top 100 charities averaged 18% overhead, with 82 cents going to the cause, while the rest of the charities it rated averaged 29%. Some household names land lower than you'd expect. Look up your favourites before assuming.

Why the lowest overhead isn't automatically the best

Don't just pick whichever charity has the lowest overhead. Three reasons:

Cheap isn't the same as effective. A charity can have low overhead but run programs that don't actually create change. A food bank that spends 5% on admin and one that spends 15% but tracks outcomes and works efficiently aren't in the order the overhead ratio suggests.

Some overhead is legitimate. The CRA itself may accept higher fundraising costs for charities working on causes with limited public appeal, as long as the costs are reasonable and controlled. Researching a rare disease is harder to raise money for than a children's hospital. Small and new charities also tend to have higher ratios.

Some charities don't need your money right now. This is the metric most donors never check. Ci compares a charity's cash and investments to its annual program spending. Its top-rated charities held about 1 year of reserves, compared with 2.9 years for the rest, and 125 Canadian charities had enough in reserves to cover five or more years of programs, totalling $14.6 billion. Some reserves are prudent. Years and years of them, while still running aggressive phone campaigns, is a reason to ask questions.

So overhead is a screen, not a verdict. Use it to rule out the bad cases, then decide based on impact and need.

A checklist for choosing a charity

1. Start with the cause, not the ask. Decide what you want your money to do before someone at the checkout decides for you. Most spontaneous giving goes to whoever happened to ask.
2. Confirm it's registered. Check the CRA list. No registration number means no receipt and no credit.
3. Check the ratios. Fundraising under 35% as a floor, ideally well below it. Look at three years.
4. Check reserves. Is there a real need for more funding, or is the money being stockpiled?
5. Check results reporting. Does the charity publish what it achieved (outcomes), not just what it did (activities)? "We served 10,000 meals" is an activity. "Participants were still housed a year later" is an outcome.
6. Give fewer, larger gifts. Five $50 donations to five charities creates five donor records and five fundraising pipelines targeting you. One $250 donation to a charity you've researched costs less to process and is easier to track.
7. Give directly. If a street canvasser convinced you, go home and donate through the charity's own website instead. Third-party canvassing firms are typically paid by the charity, and you avoid signing up for a monthly plan under pressure.
8. Consider unrestricted gifts. Money earmarked for a specific project can be harder for a well-run charity to use where it's needed most. If you trust the organization, let it decide.

How to make the calls stop

Signing up for the National Do Not Call List won't solve this. Canadian registered charities are exempt from the list, but they are required to keep their own internal do-not-call list and add people who ask.

So the next time they call:

• Ask to be added to the charity's internal do-not-call list. Say those words exactly.
• Ask them to stop sharing or trading your contact information with other organizations.
• If you still want to support them, tell them you prefer email only and will donate on your own schedule.
• If a third-party firm is calling on the charity's behalf, contact the charity directly as well.

I did exactly this. It took one call, and if the charity handles it properly, it's the last call.

The bottom line

Giving is one of the best things you can do with money, and the tax system gives a meaningful portion back. But you should know where your dollar goes. A few minutes on the CRA charity list or Charity Intelligence tells you more than any canvasser's pitch. Bundle your receipts, pool them with your spouse, donate appreciated investments if you have them, and give on purpose rather than because someone happened to ask.

This post is for general information and isn't tax advice. Rates are for the 2026 tax year. Check the CRA's current figures or talk to a tax professional before planning a large gift.