Thanksgiving: Time to Initiate a Donation Strategy

As we pause to give thanks for all we have this Thanksgiving; our thoughts turn to how we can give back to our community.  Due to the pandemic, many charities are experiencing a spike in demand for their services, and your favourite charity can use the help even more this year than in other years.

To do the most good, you should consider getting the government to kick in part of your donation.  Here are some tax strategies to do that.

Let’s say you can afford to donate $1,000. 

1. If you donate to a non-registered charity, you’ll be able to provide a $1,000 donation.
2. If you donate cash to a registered charity, the government will give you a tax credit for your donation.If you live in Ontario, for example, a $1600 donation will give you a federal tax credit of $436.00 and a provincial credit of $166.34, so the cost of your $1600 donation is only $997.66.Your $1,000 has provided the charity with $1,600 cash!The actual amount will vary slightly depending on your province of residence.
3. If you have shares which have doubled in value since you acquired them, you could donate them instead of cash.If you do, you’ll save the capital gains tax on the donated shares, plus get a donation credit for the full value of the shares donated.For example, if you donate shares worth $2,100 (with a cost base of $1,050), your total tax savings will be $1,114.46 (Ontario residents) so the cost to you is $985.54.But your favourite charity gets shares worth $2,100 which they can then convert to cash.Caution:be careful to transfer directly to the charity rather than sell them first.You’ll be reporting the capital gain in that case.

In this case, the taxpayer’s taxable income is $50,000.  The savings are even greater as your income rises.  An MFA-P™ or DFA-Tax Services Specialist™ can help with the calculations.

Additional educational resources: The Knowledge Bureau’s Donation Saving Calculator will provide quick numbers.  Sign up now for a free trial of the Toolkit. Plus, if you’re interested in helping clients with their philanthropic goals, the MFA-P™ Designation program is an invaluable resource that will provide you with important new credentials, too.