Charitable Giving More Important Than Ever
Charitable giving is one way that taxpayers can support a cause or organization close to their heart. In 2020, during a time of COVID, ton here are more worthy causes than ever before and fewer people able to contribute. It has been a difficult year for so many. As the end of the year approaches, and if you are able, it is a critical time to plan your charitable giving.
The deadline for making a tax-deductible charitable donation is the last day of the year for which you want to claim the credit. You can actually claim donations made but not yet claimed for the past five years. With a few exceptions, ONLY donations to registered Canadian charities will qualify for tax credits on your Canadian tax return. CRA has a registered Charities webpage to help you determine if your donation will be an eligible tax credit. Sometimes Canadians might be given a temporary window in which donations to a foreign disaster relief fund become eligible for tax credits — in the aftermath of a major natural disaster for example.
A taxpayer can claim the ‘eligible’ amount of the donation.
Example: If a taxpayer donates $1,000 to a registered charity, and in turn receives 3 tickets to the charity’s gala dinner (value $150), the eligible portion of the contribution will be $850 and listed as such on the receipt.
Did you know that you can donate marketable securities?
Potential donors have many organizations to choose from but there are also advantages to considering non-cash gifts such as publicly traded stocks. The CRA will not tax the capital gain or will tax only a portion of it. Giving publicly traded stocks to charity can offer a significant advantage compared to cash especially if you’re planning to donate a significant sum. For example, say you have stocks worth $500 that you bought for a dollar and decided to donate to charity. You would get credit for donating $500 but you wouldn’t get taxed on the $499 capital gain on the stocks.
Once the total amounts eligible for the charitable donation tax credit is determined, you can calculate the amount of resulting tax savings. If you donate more than $200, you qualify for a higher rate of savings. A taxpayer will receive a federal savings of 15% on the first $200, plus 29% federally on amounts over $200.
For example, if you donate $200, you receive a tax credit worth $30 (15 percent of $200). However, if you donate $600, you receive the same $30 tax savings, plus a tax savings worth $87 on the amount above $200 ($600 – $200 = $400 x 29 percent = $116), for a total tax savings of $146 ($30 + $116) on the total donation of $600. In other words, the $600 of donations that you made, only cost you $484. Additional provincial credits are also available in most provinces, which enables a taxpayer to save additional dollars on the same $600. (In Alberta, for example, a taxpayer saves 10% on the first $200 and 21% on amounts over $200; this would result in an additional $20 plus $84 or $104 for an Alberta giver for a total saving on that $600 in donations of $250, or a cost of $350).
Please keep in mind that a taxpayer has to earn more than the minimum taxable income to benefit from these savings, otherwise these donations can be carried forward for up to 4 more years to use on a future tax return.
Either way, try and donate, it’ll make you feel good and more importantly, a worthy cause will benefit!
Please do not hesitate to reach out to us at Sharon@CalgarysChoiceTaxServices.com or (403)703-7176.