The Charitable Donation Tax Credit

Of all the non-refundable tax credits, the charitable donation tax credit remains one of the most lucrative.

This because, with the exception of the first $200,while all other non-refundable tax credits are calculated at the lowest marginal tax rate , all donations are credited at the highest marginal tax rate.

A very attractive feature is that a charitable donation can be carried forward for up to five years.

This can be very important for times when you donate less than the $200.

Let's say, for example, you made a donation of $150 each year for 2003,2004,2005 for a total of $450

If claimed separately you would get the least tax savings since $150 is below the $200 limit

If you made a claim in 2004 the first $200 would be at the lowest while $100 ($300-$200) would be credited at the highest tax rate.

If you made a claim in 2005, you would get the most tax savings since $250 ($450-200) would be credited at the highest tax rate

Another advantage of the charitable tax credit is that couples can combine donations.

Strategic gifting

Strategic philanthropy

Did you know that you don't always have to donate cash to get a charitable tax credit? The CRA allows a variety of ways to make donations for worthwhile causes. Many of these ways of gifting involve the transfer of property or income producing and appreciable assets.

Want to trade in your old car for a tax deductible receipts?, Got any furniture you want to donate?, how about stocks in that solid company?.  Anything from ,vehicles, furniture, stocks , prescribed debt obligations. clothes, publicly traded shares or rights listed on a stock exchange, insurance policies or art collections.

These type of gifts are referred to as in-kind gifts. The in-kind gift is usually valued at the  fair market value at time of transfer. You usually, forsake any future gains or losses in the asset and the organization is free to use the gift at the time it decides is most advantageous. The gift can be anything which the charity accepts as a donation. Some gifts are particularly, advantageous because the accrued capital gains are tax free when the gift is transferred and are not included in income.

Strategic philanthropy or gifting is an excellent way to make a contribution either now or at some future time and reduce your taxes at the same time. 

Other examples of gifts in-kind where the gains accrue tax-free

  • prescribed debt obligations
  • ecologically sensitive land
  • Mutual fund shares
  • Interest in segregated fund trusts

This is very important. The gifts should not be sold to the charity, but transferred.

Learn more about strategic philanthropy


Tax Credits

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