Charity Tips

Charitable Donations:

16% on the first $200 given to charities and 29% federal tax credit on the remainder
To claim charitable donations, you must have official receipts that show the recipient organization’s charitable registration number.
Can claim charitable receipts made in either spouses name.
Maximum of charitable donations you can claim in one year is 75% of your net income, to an extent that charitable donations exceed the 75 % threshold they can be carried forward five years.
TAX TIP: higher earning spouse should claim all the charitable donations, add donations among taxpayer so they exceed $200 threshold to maximize charitable tax credit potential.
Annual limit for the year of death is 100% of net income for the year.
Any donations not claimed on your final tax return can be carried back and claimed on the year before death; If a charity is named as beneficiary of a life insurance policy or RRSP in your will, your estate will be able to claim the amount as a charitable donation on your final tax return or in the preceding year.
Types of charitable gifts:
Gifts o Crown: same 75% limit applies to crown gifts since 1997 (100% prior).
Gifts in Kind: refers to a gift of property; normally valued at FMV for purpose of determining tax credit (TC normally valued at 45% of property); deemed disposition at FMV is subjected to any CG;
i. Individuals or corporations who donate securities that are traded at a prescribed rate need only include ¼ TCG instead of the usual 50%
ii. For a corporation its Capital Dividend Account will be increased by the non-taxed portion (3/4) (RECALL: CDA can be repaid to the Shareholders tax-free.
iii. Election: to use a lower limit than FMV (same amount used to determine credit) Can elect any amount between adjusted cost base and FMV
Cash versus Shares:
Shares are preferable because of the ¼ CG rate for donations.
Both result in the same tax credit, but a donation of stocks has a preferable tax advantage.
Gifts of Cultural Property: deemed as being culturally significant to Canada, the donation will be equal to FMV with no TCG arising; Ecological Sensitive land donations are subject to the ¼ CG income inclusion.
Gifts of insurance policies: value of your donation will be the policy’s cash surrender value, plus any accumulated dividends and interest that are also assigned, minus any policy loan outstanding.
To the extent that the value exceeds the tax cost you must recognize the excess as income as if you cashed it in yourself.
Once a donation of a policy if you continue to make the payments they will be considered as additional donations
If the charity is a beneficiary of the policy then the policy is considered a donation made by you before your death.
Purchasing an annuity from a Charity:
for annuities acquired after December 20, 2002 the tax rules are quite different, you can earn a charitable donation tax credit if the amount you give to the charity is greater than the market price you would otherwise have paid for an annuity offering similar annual income from a life insurance company.
Taxable portion received by you from the charity; if total payments received exceed market price, you will have to bring the difference into income over the projected life expectancy.
Charitable Remainder Trusts:
consider donating a residual interest in property that is still needed to create income for the taxpayer (real estate)
Charitable remainder Trust, with conditions that income be paid to you, but the residual interest in property being transferred to the charity
Value of a gift of residual property is a discounted present value
The taxpayer will have been deemed to have disposed of the property when the residual ownership was transferred
References:
IB 110R3 Gifts and Official Donation Receipts
IB IT-226R Gifts to a charity of a residential interest in real property or an equitable interest in a trust
IB IT-244R3 Gifts by individual of life insurance policies as charitable donations
IB IT-288R2 Gift of capital properties to a charity and others
IB IT-297R2 Gifts in kind to charity and others.