Giving to worthy charities at any time is a good thing. But as year-end approaches and our mail and email boxes fill up with solicitations, our hearts and our minds – given the various methods to give and the impact of each option on your charitable tax deductions – are often particularly drawn to charitable giving. As year-end is the cut-off to make a donation that can be used on your 2022 tax return (it can also be carried over to future tax years), now is a good time to consider how you wish to give. With so many in need, and inflation biting into what Canadians can spare, here are some of the ways you can maximize your giving.
Kind Canadians
Many Canadians give to charities, whether through their time, by sponsoring others, or directly through cash donations or donations in-kind of securities and/or other assets. In fact, according to a recent philanthropy survey conducted on behalf of the Association of Fundraising Professionals*, approximately 75% of Canadians donated to charity in the prior year, and gave on average $1,000 each. Despite a pandemic-induced drop-off in volunteerism, still fully 23% of us braved the challenges and gave with their time. Looking forward, the vast majority of Canadians not only plan to continue to give, but to increase their giving in the years ahead.
Given how important giving is to and for so many, knowing your options and what might work best for you is critical. Here are three options to consider:
1. Give cash and 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.
2. 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.
3. Be kind and give in kind
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, as follows:
If you are interested in learning more about how to maximize the impact of your contributions, please speak with us today.
Source:
*What Canadian donors want, the Association of Fundraising Professionals (AFP) Foundation for Philanthropy - Canada. Survey conducted by Forum Research, and sponsored by Fundraise Up. (October 2021).
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