If you are one of these generous people, you might want to consider using certain tax-minimization strategies to enhance your philanthropy.
1: Amount of Gift
3: Tax Credits
4: Types of Donations
A cash donation to a registered charitable organization qualifies for the tax credit described above.
There is an additional advantage to donating certain kinds of securities (such as shares in publicly traded companies or mutual fund units), as the capital gain on those investments may not be taxable. By contrast, if you sell the securities first to make a cash donation you would have to pay tax on half the capital gain. (Capital gains have a 50% inclusion rate for taxation.)
- Life Insurance
A donation in the form of life insurance can result in more money for the charitable organization because the benefits will probably be higher than the premiums paid by the donor. In tax terms, if the organization is both holder and beneficiary of the policy, the donor will receive a tax credit equal to the amount of the premium. If the donor holds the policy, then, upon death, the estate will get a tax credit for a donation equal to the proceeds of the policy.
- Estate Gift
In addition to life insurance, other donations can be noted in the donor’s estate plan. In some cases, a charitable organization can be named as beneficiary of the donor’s RRSP or RRIF, which will result in a tax credit for the estate. Other cases may involve such things as a testamentary trust or remainder trust; professional advice is highly recommended in such situations.
- Other Types
Real estate, valuables, works of art and other goods may also be donated. However, it might be necessary to have the fair market value and any realized capital gain properly assessed.
Statistics Canada, « Volunteering and charitable giving in Canada », 2016.
Government of Canada, « Gifts and Income Tax 2017 », 2017.
KPMG, Charitable Gifts— « Tax Savings for 2017 », 2017.
Finance et investissement, « Dons planifiés en vogue », October 15, 2017. « La fiscalité au service de l’art », July 11, 2012.
Actualis, « Do you donate just from the heart? », January, 2017.
Centraide, « Planned Gifts ».
Travail, Emploi et Solidarité sociale Québec, « Qu’est-ce que le don planifié? ».
Desjardins, « Planning your estate ».
Revenu Québec, « Receipts for Works of Art ».