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The Tax Benefits of Charitable Giving

Erica Stephenson - Oct 13, 2021
Many of us wish to support charities that are important to us. In "doing good" it can also work to your benefit in the form of a tax credit.
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Many of us wish to support charities that are important to us. In "doing good" it can also work to your benefit in the form of a tax credit. If you make donations to qualified charities, the federal tax credit is 15 percent of the first $200 donated per year and 29 percent (or 33 percent) beyond this threshold. After taking provincial tax into account, the total benefit may exceed 40 to 50 percent, depending on your province of residence.

Deductions can be pooled with spouses and may also be carried forward for up to five years. Here is a sample of options available to your for charitable giving:

1. Gifting Appreciated Securities - Gifting publicly-traded securities with accrued capital gains to a registered charity not only entitles you to a tax receipt for its fair market value, but also eliminates the associated capital gains tax.

2. Bequests in a Will - Providing for a charity in your Will may be one way to leave a legacy. Up to 100 percent of your net income in the year of death and the year preceding death can be claimed for tax credit purposes.

3. Private Foundations - Individuals with more substantial assets may consider establishing a private foundation as a vehicle for charitable activities. Money paid into the foundation may result in an immediate tax benefit while the foundation can direct future gifts as it sees fit. It can be a cost disadvantage though.

4. Donor-Advised Funds or Community Foundations - This may be a cost-efficient alternative to establishing a private foundation by eliminating certain legal and administrative fees, while still allowing you to direct donations and achieve tax benefits. The benefit is tax deductible in the year it is made, but funds can be distributed in future years and the donor may be able to direct how funds are invested until their distribution.

We can help provide perspectives on these and other options available and have resources here to help support these endeavors.