The federal government has implemented several tax incentives to encourage charitable giving by Canadians, including the elimination of capital gains tax when you donate publicly listed securities to qualified charities. Not only do you receive a tax break, you also receive a donation receipt equal to the fair market value of the donated security.

 

Furthermore, if a corporation makes an in-kind donation of a listed security to a qualified charity, in addition to the capital gains exemption and the fair market value donation receipt, the corporation gets an addition to their capital dividend account equal to the full capital gain. The balance of the capital dividend account can be paid out to the shareholders as a tax-free dividend.

 

The Opheim Wealth Management Group can help you determine which securities are best suited for donation.

Another tax-effective charitable giving strategy is setting up your own charitable foundation. A private foundation gives you a high level of control and flexibility with respect to charitable giving, and enables you to create an enduring charitable legacy. You can make donations to your own foundation, and you will receive a donation tax receipt as you would for any other donation. In addition, in-kind donations of publicly listed securities to a private foundation are eligible for a full capital gains tax exemption. Furthermore, you will receive a donation tax receipt equal to the fair market value of the security at the time of the gift.

 

While providing a great deal of control and flexibility, a private foundation also involves certain costs and administrative requirements that must be considered. Potential associated costs may include legal, accounting, foundation registration, office space, staff, investment management fees, donor’s time, and trustee or custody fees.

 

An alternative to a private foundation is making tax-deductible donations to a public foundation. Public foundations are very similar to private foundations in many respects, but may involve fewer costs and less administration. Although you do not have outright control now, you can still recommend to the public foundation’s directors which charities should receive grants.

Depending on your age and needs, there are other creative charitable giving strategies, especially those using life insurance, to reduce taxes and significantly increase your charitable contribution after death to your favourite charity. Speak to us if you want more information on charitable giving and legacy planning strategies.