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Understanding the tax benefits of charitable donations

Donating to a cause that’s close to your heart not only provides support for something you’re passionate about, you can also benefit from tax advantages.

Details to consider

When you combine your donation receipts at tax time, you’ll get charity tax credits you can use to reduce both your federal and provincial income taxes. Other benefits can add up to significant savings:

  • A first-time donor’s super credit is available, which offers an incentive to donate if you haven’t before.
  • If you and your spouse share a bank account from which you make donations, it’s easier to claim the donations on one tax return. You can give up to $200 to receive the credit at the lowest tax rate. Donations higher than $200 have the credit calculated at a higher rate.
  • If you don’t have income or income tax owing, you won’t be able to use the tax credit. However, you can carry it forward for up to five years.

Find out if the charity you’re donating to is eligible for the donation tax credit.

Save capital gains by donating shares and stocks

There are also tax benefits for donating publicly traded shares and stock options. When you dispose of shares, you’re usually taxed at the capital gains rate. For example, if you purchased shares for $80 and sold them for $100, you have a capital gain of $20 and pay tax on 50% of that, or $10. But if you donate these shares to a charity, there may be an inclusion rate of 0% if you didn’t receive an advantage for the gift. It may be better to donate your investments directly than sell them to donate the cash, to avoid paying tax on the capital gain.

Check when you give

When you donate, keep these things in mind:

  • Some charities need a minimum donation before they can give you tax receipt. Some will only issue receipts for donations over $25, while others may issue receipts for donations less than $10. Check with the charity first.
  • While you can make a donation in someone’s name, you can’t transfer the tax receipt to them so they can claim it on their tax return.