Donate monthly
Donate monthly
Having your donation billed to your credit card once a month has several benefits. You likely won’t notice an extra $25 on each statement, whereas a lump sum of $200 at the end of the year might sting. Yet in the former case you’ve donated 50 per cent more. You may also find that your chosen charity won’t repeatedly nag you, since it can rest assured you haven’t forgotten it. “Monthly donations are also good for the charity because they help cut down on administration,” Seale says, “and they create a reliable stream of money.”
Get the maximum tax credit
Most of us know charitable donations net a tax break, but have you checked out the details? Your donation must go to a registered Canadian charity, a registered amateur sports organization, or one of several other groups specified by the CRA. Not-for-profit organizations, worthy as they may be, aren’t charities. The same usually goes for your child’s school. “They may give you a receipt,” Boufford says, “but not a charitable donation receipt. There’s a big difference.” Donations to American charities aren’t eligible either, unless you’re claiming U.S. income.
It’s also important to understand that buying something at a fundraiser doesn’t count. “It has to be a donation that gives no material benefit to you,” Seale explains. “If you buy a raffle ticket and you have the chance to win something, you don’t get a tax receipt. If you buy a $100 ticket to a gala and you’re served a meal that’s valued at $75, you get a tax receipt for $25.”
Submit your original receipts — no photocopies, no cancelled cheques — when you file your tax return. Unlike deductions — such as RRSP contributions, which you can subtract from your taxable income — charitable donations earn a credit that is subtracted from the amount of tax you owe. Regardless of how much income you earn, donations under $200 earn a federal credit of 15.5 per cent, while amounts over $200 net a 29 per cent credit; there’s also a provincial credit, which varies. Boufford stresses that the higher-income spouse should claim all donations for a couple, regardless of who actually signed the cheque. That way, all but the first $200 will receive the maximum credit.
Consider gifts in kind
Not all of your giving has to be in cash. Many charities accept clothing, household items, computer equipment, even an old car, and can give you a tax receipt for the item’s fair market value. Technically, a gift is supposed to be valuated by an independent appraiser before you get a receipt. “I tell clients to have something on paper from a third party saying what the value is,” Boufford says. That said, if you donate a few boxes of children’s clothing to your local synagogue and it gives you an on-the-spot tax receipt for $25, the CRA is highly unlikely to question it. “That’s okay, as long as you’re not giving away mink coats and claiming thousands of dollars,” says Boufford.
Share your shares
Maybe you’d like to share some of your investing success with your favourite charity. If so, don’t sell your stocks or mutual funds and donate the cash — instead, make a gift of the investments themselves. Since May 2006, the federal government no longer taxes capital gains on securities donated directly to charity. Boufford gives the example of a stock you bought for $2,000, which has since shot up to $10,000. If you sell the stock first, you’ll pay tax on half of the $8,000 capital gain. Under the new law, by donating the stock directly, you avoid this tax — and if you’re in the highest bracket (45 per cent), you’ll save about $1,800. Meanwhile, both donations benefit the charity equally, and both get you the same $10,000 tax receipt.
