How to be smart with your charitable dollars
Prepare for a deluge of entreaties. The season of giving is about to begin. Whether you are motivated by a charitable spirit or thinking about reducing taxes while doing some good, chances are you’ll be opening your wallet soon.
U.S. studies indicate that more than 70 percent of charitable donations happen between now and the end of the year. I expect the Canadian figures aren’t much different.
Women, by the way, are a bit more inclined to give than men. According to the latest Statistics Canada figures (2010), 86 per cent of women made at least one charitable donation throughout the year compared to 82 per cent of men.
Interestingly, those living in the west are more likely to give than central or eastern Canadians. Albertans donated $562 on average in 2010 while Quebec residents averaged $208, the smallest amount in Canada.
Whether you have a buck or a billion, it’s important to make every charitable dollar count. Strategic philanthropy, a buzz term these days, basically means getting the best tax advantage for your buck while maximizing the benefit for the charity.
You can carry forward donations for five years and then claim them on your tax return. This is a good approach for those donating small amounts. The federal tax credit is 15 per cent on the first $200 donated and 29 per cent after that. So, rather than claiming $150 in a given year it’s better to save up the receipts until you have a larger amount and therefore receive the 29 per cent credit. There are also provincial tax credits.
A temporary super credit (until 2017) has been introduced for first-time donors, which adds an additional 25 per cent of the total donated (up to $1,000) to the existing claimable credits.
Sometimes it’s better to donate land, stocks or other assets than cash. For example, say you want to give $5,000 to your favorite charity. Perhaps you have $5,000 in securities that are currently sitting in a non-registered investment account. If you bought the securities for $3,000, sold them and then donated the cash, you’d have $2,000 in capital gains, which could mean a higher tax bill.
It might be more advantageous to transfer the securities to the charity instead. This way there will be no capital gain but you still receive the tax receipt.