Charitable giving shouldn’t be ‘taxing’

Q. Our office is currently raising money for the United Way and I’m wondering how much I can donate to be eligible for a tax rebate? Can you explain the limits and how they apply? Helena J.

A. Charitable giving in Canada has a strong tradition and is very important to the many charities that depend on their donors’ generosity. The introduction of tax incentives by the Federal government increased the opportunities for Canadians to consider charitable gifting as part of their annual financial planning. The United Way is an example of an organization that qualifies as an official charity – one that can legally issue tax receipts – because it is registered with the Canada Revenue Agency. Individuals will receive a federal tax credit of 16% on the first $200 donated to a charity, and 29% on any remaining amounts. As donations can be either used in the current year or carried forward for up to five years, a donor can maximize the amount of the tax credit by not claiming charitable donations until the $200 threshold is reached. Alternatively, married and common-law couples can pool their donation receipts to maximize their tax credits. This helps to avoid having two $200 ‘thresholds.’ An individual at the top income level could expect tax savings ranging between 39% and 48% (depending on the province) for every dollar donated above $200.

For the majority of Canadians, cash gifts are the most common way of donating. However, there are alternatives to giving a cash donation such as gifting capital property including: stocks, bonds, real estate, certified cultural property, and proceeds of a life insurance contract. Charitable gift planning is a growing endeavor and worthy of individuals’ time and attention if they want to maximize their opportunities for significant tax and estate benefits. Through planning a donation strategy, many people have left a legacy long after passing for the benefit of future generations.

Bev Moir is a financial planner with The Moir Team at ScotiaMcLeod in Toronto. ScotiaMcLeod is a division of Scotia Capital Inc., a member of the Scotiabank Group. Member CIPF.

This article is for information purposes only and is not intended to solicit any investment. It is recommended that individuals consult with their own financial or tax advisor before acting on any information contained in this article. The opinions stated are not necessarily those of Scotia Capital or The Bank of Nova Scotia.