Maximize the Benefit of your Donations to Charity: Helping Food Banks Feed the Most

Around this time of year, I start collecting all of our receipts for donations to registered charities. Now that many are e-receipts it takes a bit of checking to make sure that they are all present and accounted for. (pun intended) The first thing I noticed was that blessedly there were fewer major natural disasters in underfunded countries in 2012. The tsunamis, earthquakes, and floods that resulted in large receipts from international aid groups were mercifully absent. The next thing that crossed my mind was whether we had been maximizing the benefit to ourselves and those we are trying to help through optimally donating.

Written: 2013
Reviewed: 2023
Revised: 2023

The following articles describe some ideas that we have come up with to make our limited time and dollars do the most. I’d be really interested in hearing what others have thought up. There’s lots of room for improvement!

Giving $$ to the Food Bank Feeds More Visitors than Giving Retail Groceries

So far this school year, we’ve been asked to donate to 3 food drives. This is a worthy idea, of course. Anyone’s luck can take a turn for the worse and a food bank can help ease them past the crisis. Then, once their situation has improved, they can be the ones giving instead of receiving.

I do question, though, the logic of giving groceries purchased at regular retail prices. I am a savvy grocery hunter and I know the cycles of sales for most items. And I do pick up healthy staples on sale knowing full well I’ll get pressured into donating them to a school, business or worship food drive. But part of me knows it’s not the way to maximize the benefit from my donation dollars.

If I give the food bank a cheque, instead, they can use it to buy what they most need.
Sometimes what’s donated isn’t actually what’s needed.

Frankly, I get annoyed with some grocery stores near me. They sell pre-packed bags to donate to the food bank for a reasonable price. But what they pack in the bags is upsetting. One recent one had a box of 6 packets of store brand instant oatmeal and a box of store brand snack crackers.

Grocers get real! The clients at food banks are hungry. They are only allowed a small amount per month from the food bank, so they want and need to maximize the nutrition.
For the same price as that 6 pack of sweetened oatmeal, the store could have packed a name brand 1 kg (2.2 lbs) bag of quick oats. A normal sized serving for an adult is 30g. So it would make 33 servings of oatmeal. Versus 6! And instead of the snack crackers the store could have put in a small bag of sugar to sweeten the oatmeal (and maybe get used for other things).If you’ve never eaten oatmeal, yes, quick oats are just as fast and easy to cook as instant oatmeal. You just add hot water, or if you have a microwave, you just nuke it in a bowl or mug.

Sometimes, too, what’s donated does not include the really expensive, but needed, items like baby formula and diapers. (Please don’t say babies can all breast feed. They can’t if their mothers are ill, having chemo, hospitalized or have had mastectomies.) The food bank can buy these items with a cash donation.

The food bank can also usually buy items at wholesale, not retail prices. In fact, some food banks are even able to buy at prices below wholesale since the suppliers know that the food is not being used to compete against retail markets. People shopping at the food bank aren’t shopping anywhere else, unfortunately.

And there’s a third benefit to donating in cash. If you donate more than about $12, most food banks can issue you a receipt for your income taxes. If you donate generously throughout the year, like we do and I hope you do, then your donation generates a tax credit for 38.8% of the donation. Even if you can only donate a very small amount of money to charity, say $200 a year, in Ontario, that would get you a $40 tax credit. (This is the combined federal and provincial credit in 2013.)

The tax credit is not just nice to have. It means I can actually donate 38% more to the food bank without having to pay anything more. That’s 38% more money and therefore more food that the food bank can use to help out people who need it than if I had just spent the original amount at the retail store and given the food itself to the food bank.

The Merit of Giving Food You Can Touch and See

I do realize that there are times when giving food in kind is beneficial for other reasons.
For example, each year our place of worship puts together hampers for families who are having a tough time financially. (For those who care, yes, many of the families receiving those hampers do not have any faith or have a significantly different faith than we do.)

Our family sponsors a hamper for one other family. We buy everything that goes in it. My children watch me shop for the hamper. They see the pile build and they see how many reusable bags it fills when it’s time to give it. And they get a sense of just how much food costs and how little food you get for your money.

We also talk about why we’re giving more than the minimum requested. We talk about our holiday meal and the special things we eat. Then we add some of those treats to the hamper.

We talk about how we use leftovers after the holiday. And we add the things needed to use those leftovers: a 10 kg (22 lb) bag of rice, a five kilo (10lb) bag of onions, a 2.5 kg (5 lb) bag of carrots, cans of lentils and beans, a few packs of herbs and spices. Can you see the soup simmering?

And we add more than the minimum of household supplies. Bulk packs of tissue boxes are visually more impressive to my children than zeroes on a cheque. They know how often kids get colds. The mountain of toilet paper may embarrass them a bit, but since their school often runs out, they know how helpful that is, too.

So sometimes we sub-optimize our contribution in one way (quantity) but we maximize it in another (education.)

Continuing in a Charitable Mood
Future articles will continue to explore the theme of maximizing donations to charity. If you’re intrigued (or just like clicking things) please consider:

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Do you support a food bank? Or have you had to use one during a time of need? Or do you have other suggestions for optimizing the benefits of charitable contributions? Please share your experiences with a comment.

Four Overlooked Benefits of Charitable Donations and the Charitable Tax Credit

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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