Residents of small towns are usually heavily involved in community initiatives.
Whether it is sitting on town council or volunteering at the community centre, small towns thrive off of the time invested by their citizens.
Volunteer firefighters are especially needed in these smaller communities.
Individuals volunteer not only their time but their safety to ensure their neighbours are protected from the disasters that fire can bring, especially in a farming community.
The federal government recently decided to offer a tax credit to these individuals who donate their services at their local fire station.
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The volunteer firefighter tax credit is $3,000 and available only to individuals.
To receive this tax credit, volunteers need to work for the fire department at least 200 hours in the given year.
They can accumulate these necessary hours in several ways:
- being on call for firefighting and other emergencies
- attending meetings at the fire department
- taking a course in preventing and putting out fires
They can also perform secondary services to reach the 200 hour threshold, such as maintenance of department vehicles and equipment and delivery of educational sessions undertaken by the fire department.
Volunteer firefighters who use this tax credit can reduce their taxes by as much as $450. This is calculated by taking the tax credit amount of $3,000 and multiplying it by the non-refundable tax credit rate of 15 percent.
The unused difference is lost if they do not have enough income to offset this credit, and is not available to be carried forward to a future year.
Volunteer firefighters may be eligible for an income exemption of up to $1,000 if they received a payment from a government, municipality or other public authority for carrying out volunteer firefighter duties.
However, they will not be eligible for the volunteer firefighters’ credit if they choose to claim this income exemption.
There is a tax planning opportunity here because the government is providing an option to choose from either the tax credit or the $1,000 income exemption.
It would be beneficial to see which scenario provides the better outcome. The $1,000 exemption could provide a better benefit than the $3,000 tax credit, depending on which tax bracket a volunteer falls into.
Credits offered to individuals may be a small piece of the total tax pie, but they can add up to significant tax savings. Therefore, it is beneficial to consider all of the options.
To determine if you are taking full advantage of the personal tax opportunities available to you, such as the firefighters tax credit, be sure to talk with your personal tax professional.
