BENEFITS OF DONATING

Learn about in-kind donations at HCI.

Charitable Giving – A Win-Win Strategy

Your Charitable Giving strategy will help reduce the personal income taxes that you pay. The Canadian Government encourages charitable giving by giving back a large portion of your donated amount in the form of reduced taxes or a higher refund when you file your income tax return. Here are the fundamentals of charitable giving:

The following table illustrates the tax benefit that you can receive by making that donation:

Income Range $42,707 - $80,963 Above $80,963
Amount of Donation ($)
Tax Savings ($)
Tax Savings ($)
100
20.05
22.88
200
40.10
45.76
500
160.58
184.98
2000
762.98
881.10
10 000
3,975.78
4,593.90

Donating Securities In-Kind

The rules around donations in-kind make it more attractive to donate stocks, bonds, mutual funds and other marketable securities, rather than cash. By donating publicly traded securities, you eliminate the capital gains tax that you would have otherwise paid.

The example below compares the huge tax benefit of donating securities in-kind vs. selling
the securities first and then donating cash to the charity:

Sell Securities & Donate Cash Donate Securities In-Kind
Current Market Value of Securities
$100,000
$100,000
Adjusted Cost Base
(40,000)
(40,000)
Capital Gain
$ 60,000
60,000
Taxable Capital Gain (50% vs. 0%)
$ 30,000
0
Tax payable on Capital Gain (assume 45%)
A= ($13,500)
0
Tax Benefit of Donation (at 45%)
B= $ 45,000
$ 45,000
Net Tax Benefit (A+B)
$ 31,500
$ 45,000

Net Savings from Donating Securities vs. Cash = $13,500

Donating Life Insurance

You can purchase life insurance and make the charity as the beneficiary. You will receive a tax receipt for the insurance premiums that you pay for this coverage. You can also transfer an existing policy for which you will receive a tax receipt based on the cash surrender value at the time of transfer, and all subsequent premiums will result in tax receipt equal to the annual premium being paid.

There are other complex strategies if you wish to donate a sizeable amount. These are
considerations to take into account in proper tax planning and estate planning, in particular.
Depending on your particular situation, you may wish to consult your financial advisor,
lawyer or tax accountant to determine the most effective and efficient tax planning strategy,
and at the same time helping out your favourite charity.

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