Five ways to stretch your charitable dollars

Giving to a charity not only helps support the causes you care about — it also makes you feel good. But being aware of how you give can help you get extra mileage for your charitable dollars and possibly reduce your tax bill in the process. Here are five tips on how to get the most bang for your charitable buck.

1. Don’t forget to claim the tax credits. You don’t want to leave money on the table.

“People sometimes forget to claim their charitable tax credits,” said Bill Petruck, president and CEO of Funding Matters Inc., a company that advises charities, individuals, corporations and governments on giving.

Although it can be a bit of a book-keeping exercise to track down and tally electronic and physical receipts from charities, your reward is a tax credit that can be used to lower your taxable income.

“By donating to your favourite Canadian charity, you may receive as much as 53 per cent of the amount you donated back at tax time,” said Jane Ricciardelli, chief operating officer and acting CEO at CanadaHelps.org. “And the amount you can claim in tax credits increases when you give more.” To see what your cash gift could save you in taxes, check out this government of Canada calculator.

2. Give stocks instead of cash.

From 2020 to 2021, securities donations made through CanadaHelps (a non-profit aimed at advancing philanthropy through technology) grew by 91 per cent. And for good reason: When you donate stocks or mutual funds directly to your favourite charity, you eliminate the capital gains tax you would normally pay when you sell securities, and yet you get a tax receipt for the full market value of the donation. That can make a real difference in how much it costs you to contribute, said Petruck.

For instance, he points out, if you have an annual taxable income of $230,000 and you cash in $2,000 in shares to donate to your favourite charity, the donation will cost you $992. But if you donate those shares directly to the charity, the cost of that same stock donation is just $698.

“A cheque or credit card donation is made with after-tax dollars,” said Petruck.  “Whereas a stock or mutual fund donation is made with pre-tax funds and avoids the income inclusion if made in-kind to the charity.” 

3. Give every Tuesday.

Recurring donations are a lifeline for charities because they provide revenue predictability. “We’re really proud that we have over 30,000 monthly donors to CAMH,” said Deborah Gillis, president and CEO of the CAMH Foundation.

“It sends a message to the staff of the hospital that they’re supported. And most importantly, it sends a message to all those living with mental illness that they are seen, and the community cares about them.”

4. Seek out charitable matching plans.

The basic concept: You make a donation to charity, and the government, your employer or even an individual donor matches it. For example, World Vision uses matching programs from the Canadian government, the World Food Program and corporate partners to multiply donations made through its holiday gift catalogue by up to seven times their value.

In other cases, matching programs are specific to a certain day or event. This Giving Tuesday, for example, the Alzheimer Society of Canada has set a goal of raising more than $200,000 for research. “Thanks to the generosity of a donor wishing to remain anonymous, all gifts up to the $25,000 level will be matched,” said chief development officer Gail Black-Elliot.

5. Leave a lasting legacy.

“Everyone worries about outliving their money,” said Petruck. So why not leave a legacy gift — you know you’re not going to need that cash. And by willing even a small percentage of your estate to a non-profit, you can do three things: save tax, help support your favourite charity and still leave plenty behind for the people you love.

Here’s how and why it works: Although there’s no inheritance tax in Canada, when you die, the Income Tax Act acts as if you have sold all your property and assets at their fair market value right before death — even though the assets are not actually sold.

The Canada Revenue Agency (CRA) calls this a “deemed disposition” and it applies to most properties. The CRA then calculates the capital gains on those assets — basically, the difference between what you originally paid for them and what they’re worth when you die. Before your heirs can access those assets, your estate has to pay tax on the capital gains.

But, by making a legacy gift, you can lower the capital gains tax on your estate, making it more economical to give. For example, in Ontario, if you leave behind an estate valued at $500,000 when you die, and you originally bought the assets for $200,000, you will have accumulated $300,000 in taxable capital gains.  

“The tax owing on that estate would be about $73,815 and your heirs would inherit $426,815,” said Petruck. If, on the other hand, you make a bequest of 10 per cent of the estate, the charity will get $50,000 and the donation triggers a tax credit of $20,040. “The new tax owing is now $53,775 and the heirs still get $396,225,” said Petruck. What’s not to like?