A friend asks you to buy a seat at a charitable fundraising
dinner. Your colleague asks you to sponsor her walk for charity.
The mail is full of appeals for your support. How do you make the
most of giving back to the community?
Consider these tax tips to make sure you get the best tax
benefits for your gift. In order to obtain a tax receipt, the
organization must be registered with the Canada Revenue Agency
(CRA). Ask about the charity's registration number and ensure
that it's printed on your tax receipt. If in doubt, look up the
charity on the CRA website at:
Tax credit structure
The first $200 of your donations generate a tax credit at the
lowest tax bracket (20% in Ontario), and anything above that amount
qualifies for a tax credit at the highest bracket (46% in Ontario).
With certain exceptions, donation claims are limited to 75% of your
Any donations you do not claim in the year can be claimed in any
of the five subsequent taxation years.
Pool and save
Consider pooling your donations with your spouse so that you
maximize the claim as the CRA allows either spouse to claim the
When you receive
If you receive something of value from the charity in return for
your gift (known as an "advantage"), the amount of the
advantage will be deducted on your receipt. When you buy that
ticket to your friend's fundraising dinner, the value of the
dinner will be deducted from the amount you paid and a receipt will
only be issued for the excess.
Donating your expertise
A gift of services is not eligible for a tax receipt because it
is not a gift of property. If you wish to provide services to a
charity and appear as a donor, you will need to bill the charity
for the service and then donate the payment back as a charitable
gift. You will have to report the service income and the offsetting
credit. There may be no tax advantage to this strategy unless your
service income will be taxed at a lower tax rate than the donation
Giving in big ways
For larger gifts, think beyond gifts of cash. Consider gifting
publicly traded marketable securities from your investment
portfolio. While this will be considered a disposition of the
security, the CRA does not tax the capital gain that arises on the
disposition, and you will receive a donation receipt for the fair
market value of the gifted shares. If there is a capital loss on
the share disposition, you will be able to claim the capital loss
and the donation amount.
Have you received stock options from your employer? If you
exercise the options and donate the shares within 30 days of
exercise, you will be able to offset your stock option benefit.
Consider gifts of capital property such as real estate, artwork
or collectibles. The donated property will be considered disposed
of, so you will have to report any capital gains (or recapture any
depreciation on the property); however, the fair market value of
the gifted property will qualify for a tax credit, which will more
than offset the disposition taxes and leave you with credits to
claim against your other sources of income.
If the donated land qualifies as "ecologically sensitive
land" (generally land that is certified by the Ministry of the
Environment to be for the conservation and protection of the
environment), no tax on the capital gain arises on the gift.
Similarly, artwork that is considered a "cultural
gift" (i.e., items certified by the Cultural Property Export
Review Board as national treasures) is also not subject to tax on
the capital gain when gifted to designated institutions.
When capital property is gifted to a charity, an appraisal will
be required to substantiate the value of the gift. You will also
have to be careful that the property was owned for more than three
years prior to the donation and was not acquired as part of a
'donation scheme;' otherwise the value of the gift will be
reduced to the amount paid to acquire the property instead of its
fair market value at the time of the gift.
Life insurance donations
Finally, if you have life insurance coverage that you no longer
require, consider gifting the policy to a charity. You will receive
a receipt for the fair market value of the policy. Depending on
your health, life expectancy and the replacement value of the
policy, among other factors, the value could be significantly more
than the cash surrender value of the policy. Consequently, even a
term policy could generate a sizeable tax receipt. If you continue
to pay the ongoing insurance premiums, these will also constitute
additional charitable gifts as the payments are made.
Before making a significant charitable gift, please contact your
Crowe Soberman advisor to discuss the tax benefits and implications
to ensure that you receive the optimal tax results.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Recently, I was contacted by a small business owner who had an unpleasant conversation with a CRA collections officer about an outstanding GST/HST assessment against his small company (of which he was a director).
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