Common Cents – Charitable Donation: Reduce Taxes, Give Back

Donating to a charity is one of the ways of reducing taxes while supporting causes that you may be passionate about. Many campaigns will reach out to individuals to support their organization. It is important to consider your own situation and to be mindful of potential pitfalls.

Charitable organizations and qualified donors can be looked up online with the Canada Revenue Agency to ensure they are registered. Foundations such as the Victoria Foundation, Saanich Peninsula Community Foundation or online platforms such as
www.CanadaHelps.org are great resources and ways to help support local charities or causes.

Donations are credits, not deductions, and require the tax receipt and not just a pledge. They can be used as a credit and carried forward, if not used, for up to five years. They may also be combined with your spouse’s donations. U.S. donations to a U.S.-tax-exempt organization or University can be used in Canada but generally, may only be used against U.S.-sourced income. When claiming a larger amount of donations, CRA will often review this to ensure they are within the tax rules.

Aside from cash, there are many alternatives to donations. In-kind donations of securities can be beneficial, as you receive the fair value of the donation and an exemption from the capital gains tax. Donations of other in-kind goods such as artwork or services may also be an option. Life insurance policies, registered funds and donor-advised-funds all have their advantages and disadvantages. Again, ensure these go to a qualified organization and must be appropriate for you.

If you cannot donate at this time, many local charities need volunteers. Your skills may be needed as much as cash. If you do receive solicitations, be wary of tax schemes such as requesting donations of bitcoin or gift cards. Protect your personal data!

When you have a life change, revisit your plan and discuss with your loved ones your reasons for your wishes. Charities also change, so keeping up to date with these organizations helps to ensure they remain in line with your values.

Charitable giving continues to be one way of reducing taxes while giving back to your community. Remember, often a small amount goes a long way for a smaller institution. Organizations have people who are passionate about their work and would love to discuss options. The tax rules are complex and continue to change. This information should not be used as advice. It is more important to do your research and consult your professionals.

For more information, email sheila@schenncpa.ca.