Canadians are generally a very giving lot – 84% of Canadians made a charitable donation in 2010; the last year Statistics Canada kept records. Between time spent volunteering in a wide range of organizations and money donated to worthy causes, philanthropy in its various guises seems to be in our DNA.
Our reasons for giving are as diverse as we are as a people, but according to Imagine Canada, we give out of compassion for others, for a cause we believe in, to make a contribution to our community, or for something that touches us personally. Whatever the reason, we are a better country for all of this philanthropy and our government actually recognizes the value to our economy of all this compassion, by granting us tax credits on all donations to qualifying charities or donees.
What Qualifies
A qualifying donee is a registered charity or one of several other public organizations, such as an amateur athletic association, which can issue tax receipts. Make sure you obtain a receipt and that the donee issuing it is legally entitled to do so. The Canada Revenue Agency provides a searchable online database that allows you to confirm whether a charity is registered and eligible to issue official donation receipts. You can also determine the status of a registered charity by calling the CRA at 1-800-267-2384
How to Claim
To claim your credit, report it on your annual tax return. As a rule, at the federal level, your credit will be 15 percent of the first $200 of donations and 29 percent of your additional donations. All provinces also have similar credits, which fluctuate between 4 percent and 24 percent. The CRA provides an online tool to calculate your credit, including the provincial component. As a first-time donor, you can claim an extra federal tax credit of 25 percent on your first $1,000 of donations. This works out to be the equivalent of a tax credit of 40 percent on your first $200 in donations, and 54 percent on amounts above $200. So there are advantages to be generous.
The largest donors in Canada come from the over 65 age group. This is not surprising considering we have had a lifetime to save, are inheriting from our parents, and consequently have a larger base of assets from which to gift. There is a huge opportunity for baby boomers to make a lasting impact on a cause or group that we believe strongly in.
Add Gifting to your Estate Plan
Whether while you are alive, or through your Will following your death, you can gift shares of stocks, mutual funds, or even ecologically sensitive land which may have grown in value a great deal over the course of your ownership. Normally, if you sold these shares or land, you would have to pay tax on the capital gains. If you donate the shares or land as is however, the CRA exempts you or your estate from paying tax on the proceeds. We advise consultation with both your lawyer and accountant before acting on this type of gifting to ensure the asset you are donating is a qualifying asset under CRA rules.
If you are wanting more of a lasting legacy, you can also set up a Charitable Trust and donate your shares to the Trust under the same rules as apply above. The Trust can then distribute either the earnings or a set amount to the charity or charities of your choice, long after you are gone. Ask us about this if you’d like to explore this option.
We urge you to give gifting your consideration, especially in your Will. It is something that is often overlooked, but is an easy and financially beneficial way to support a cause you believe strongly in, and leave a legacy at the same time.