Category Archives: Money Tips

Four Overlooked Benefits of Charitable Donations and the Charitable Tax Credit

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When Morgan Fisher and his sister Laurel discovered hidden treasure worth $17,000 in their relative’s attic, they donated the loot to charity. The donation earned them a large income tax credit ensuring a win-win for themselves and the charity.

Written: 2012
Reviewed: 2023
Revised: 2023

First let’s review the obvious benefit of a charitable donation.

The Bonus of Supporting a Charity: A Generous Income Tax Credit
Donating to charity feels good, but it also helps donors at income tax time. Providing you have the proper paperwork, the donation can be claimed for a credit on your annual income taxes.

For example, say you donated $2000 to the local food bank and that the food bank is a registered charity listed by the Canadian government. If so, you or your partner can claim the entire donation or you can split the donation. Whoever claims it gets an income tax credit.

If that was your only charitable donation that year, the credit is calculated as (200)*.15 + (2 000 – 200)*.29 = 30 + 522 = $552.

That’s just for the federal portion of the income tax credit. Many provinces and territories also have tax credits.

Estimating the Tax Credit for a Charitable Donation

The government had put a handy calculator on their website to allow you to estimate what the tax credit might be for a donation. Unfortunately, they are not updating it any more.

But for historical interest, the calculator is at https://www.canada.ca/en/revenue-agency/services/charities-giving/giving-charity-information-donors/claiming-charitable-tax-credits/calculate-charitable-tax-credits/calculator.html

It says, for Newfoundland for 2012 a donation of $2,000 is worth a combined federal and provincial credit of $806.80. For Ontario for 2012, the combined credit would be $762.98. (At those rates, maybe it would be worth moving to the Rock from Ontario if you’re planning to donate a few million to charity!)

However there are other often overlooked benefits to donating.

Overlooked Benefit 1: Another Reason to Donate: Avoiding Capital Gains Tax
Right now, the government is providing an incentive to donating to charity. Under current Canadian tax rules, you do not have to claim or pay taxes on the capital gain of an asset donated directly to a registered charity.

For example, say forty years ago Gramma bought 100 shares of CIBC stock at $20 each. Due to stock splits and reinvested dividends, she now has 300 shares with a current value of $78 each. It will take a lot of math to figure out her adjusted cost base and her capital gain on the shares if she sells them.

If she donates them all to charity, however, she does not have to declare the capital gains on her income tax. Instead, she can claim a tax credit for the donation of 300 shares at $78. (300 x 78 = 23 400) For her donation of $23 400, she would get a tax credit in PEI of $10 652 or in Alberta of $11 650.

According to the Canada Revenue Agency “Generally, your tax savings will be equal to the amount of the charitable tax credit calculated.” So Gramma could be getting $10- 12 000 in after tax dollars for her shares. And she’s helping her favourite charity a lot.

To make the claim, she would have to have proper documentation from the charity. The item being donated might have to be professionally appraised.

Overlooked Benefit 2: Donating Saves the Hassle of Finding a Buyer
The Fishers helped a charity, specifically a museum in PEI, when they donated their find. However, they also benefited because it might not have been easy for them to sell the antique money they found at its appraised value. By donating they avoided having to find an auctioneer or dealer to help them sell their find. They also avoided having to pay fees or commissions on the sale.

For valuable items that are more difficult to sell, such as works of art or rare books, donating them to a charity can also save time, effort and fees. You would not have to find a buyer or arrange an auction for the item. Generally, you would also avoid having to pay insurance costs to protect your asset while waiting to make the sale.

Overlooked Benefit 3: Another Bonus for High Income Earners
In some provinces, such as Ontario, the charity tax credit will also reduce the amount of provincial surtax to be paid. Fees such as Ontario’s Health Premium can also be reduced.

Overlooked Benefit 4: Charitable Donations from Estates
If a person dies, and the will permits it, the executor can donate some of their belongings to a charity. The donation can be claimed on the tax return for the Estate of the person who died. The resulting tax credit can be very useful in reducing the tax owed by the Estate.

Is the Charity Tax Credit Refundable?

No. The tax credit is applied against your taxes owing but if the credit is larger than the amount of tax you owe, it is not refunded. The Canada Revenue Agency states, “Generally, your tax savings will be equal to the amount of the charitable tax credit calculated.”

So if you have no or limited tax owing in a given year, you may wish to make a smaller charitable contribution, or defer claiming the charitable contribution till you owe more taxes. You can defer claiming a charitable contribution for up to 5 years. Consult a tax professional to optimize your taxes.

How Do I Know My Cause is a “Registered” Charity?

You can check whether an organization is a Registered charity using the list on the Canada Revenue Agency website at:

https://apps.cra-arc.gc.ca/ebci/hacc/srch/pub/dsplyBscSrch?request_locale=en

Does the Government Agree that the Item I’m Donating is a Charitable Donation?

A list of examples of acceptable donations is provided on the Canada Revenue Agency website at: http://www.cra-arc.gc.ca/chrts-gvng/dnrs/rcpts/dntn2-eng.html

You should get professional tax advice before making a decision to donate a valuable item to charity.

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How To Save Big Bucks on Buying Gifts for Birthday Parties

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If you are a parent, you probably are responsible for buying 3-5 birthday presents per year per child for your child’s friends’ birthdays. It’s expensive and time consuming. You can save time and money by buying some of the gifts in advance, specifically during the Thanksgiving to Christmas sales.

Written: 2012
Reviewed: 2023

Buy Presents that Most Children Enjoy

Obviously buying trendy, hot toys in advance is risky. Today’s Squishmallows are yesterday’s Silly Bandz are last century’s Pet Rocks. But it should be the birthday child’s family that provides those last-minute-must-have gifts anyway. If your child is just a friend attending a party, any respectable gift is good enough.

Toys that most children enjoy include the classics like Lego. Lego has the added advantage that it can be reassembled in different ways. In fact, to build some really cool Lego structures and habitats you need a ton of pieces.

Buy Them at Deep Discounts
And guess what? Lego goes on sale, sometimes deeply on sale, for the November and December sales.

A quick scan of the online sales sites for ToysRUs and Walmart shows sets on for 25-40% off regular price. Sometimes even very expensive sets are on 20% off for a few weeks in late October and early November.

Other toys that go on deep discount at this time of year as lures to get you into the store include Barbie dolls. If you have a daughter of a certain age, her friends are probably going to find a Barbie acceptable. You can improve the odds of it being liked by choosing a doll that allows the owner to DO something. For example, there are dolls that come with little dog grooming sets, horses, doctor, astronaut or artist sets. Then even if the child isn’t that keen on the doll, they at least have small toys to use while playing with their favourite stuffed animal.

Keep an eye on ads and flyers for stores that stock a few toys at very low prices to draw traffic. For instance, Canadian Tire often brings in toys and sells them at 30-50% off retail.

Look for Year End Clearances
Also, since you want the toys for the following year, look for year-end clearances from stores that don’t want extra stock sitting around. You can sometimes get good toys for 80% off at stores that don’t stock toys year-round. Canadian Tire, again, often has big sales after December 25. So do smaller Walmart stores.

Think Beyond the Toy Bin
Other good buy ahead and have on hand birthday present ideas include the unexpected:

  • Cool flashlights
  • Super soft beach towels
  • Cozy sleeping bags
  • Compasses
  • MultiTools
  • Real cooking tools

(The compasses and multiTools are particularly good for Spy Kids.)

Many of these items also come on sale for the holiday rush. Put yourself in a child’s mind and flip through the flyers thinking, “what if….”

Then go out and get the coolest gifts for the lowest cost.

Join In
Have you discovered a great holiday bargain that can be bought ahead for later birthdays? What’s your favourite unexpected gift to give or receive? Please share your experiences with a comment.