A regular Canadian’s guide to making a bigger charitable difference.
A masterpiece of French Gothic architecture, the Notre Dame Cathedral was the most visited historical monument in Paris, France. Yet when it went up in flames in April 2019, 859 years after its 100-year construction, people all over the world took to social media to criticize the philanthropists who donated US$1 billion towards its restoration in just two days.
What about climate change, or the rising Ebola death toll in the Congo? Indeed, there’s never been any shortage of important causes to care about, and it’s not just billionaires with a love for French Gothic who can make a difference. How can regular Canadians like you make your donations go further? Give back – and give more for less while you’re at it A regular Canadian’s guide to making a bigger charitable difference.
Donating cash vs. donating shares
Marginal tax rate: 50%*
Donation tax credit: 46%**
| Sell shares and donate cash | Donate shares directly | |
|---|---|---|
| Future market value of donation (a) | $20,000 | $20,000 |
| Adjusted cost base | $10,000 | $10,000 |
| Capital gain | $10,000 | $10,000 |
| Taxable capital gain | $5,000 | $0 |
| Tax on capital gain ($5,000 x 50%) (b) | $2,500 | $0 |
| Donation tax credit ($20,000 x 46%) (c) | $9,200 | $9,200 |
| Total cost of donation = (a) + (b) – (c) | $13,300 | $10,800 |
Net tax savings from donating shares: $2,500 ($13,300 – $10,800), assuming that donations of $200 have already been made. * Assumes the person has taxable income below the top bracket and donations in excess of $200. **Assumes the person is also entitled to a combined federal and provincial donation tax credit at a rate of 46%.
Claim your federal and provincial tax credits
With some planning, tax savings can fund close to 50% of your gift in some provinces and territories. For donations over $200, the provincial tax credit is usually equal to the highest marginal tax rate – but this amount varies by province. The federal tax credit your donation attracts depends on a few factors, like your marginal tax rate and the amount of your donation. To ensure you take advantage of these credits, discuss your charitable giving with your tax advisor.
Set up a charitable gift fund
With a charitable gift fund, you can support charitable causes that are important to you, while receiving potentially significant tax advantages. To set up your own fund, you need to make an initial irrevocable contribution beginning at $25,000, then you can make additional contributions of $250 or more at any time. You can invest the contributions in a way that reflects your individual philanthropic objectives, and recommend grants from the fund to qualified charitable donees whenever you wish. You receive tax receipts for your contributions, which can potentially enable you to give more. To determine if a charitable gift fund is right for you, please contact us.
Consider donating securities, not cash
You normally pay tax on a portion of capital gains triggered by the sale of a stock or bond, but this tax rate is reduced to 0% when you instead donate the securities directly in kind to a qualified donee.
This is no exhaustive list and, for a thorough and personalized assessment of your charitable capabilities, you’ll want to review your giving strategy with your professional advisors. Even a short review and action plan can help ensure your generosity creates the outcomes you’ve envisioned.