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We all receive requests to support organizations. How do you decide what charities you are going to support? When do you make that decision? If you are like most of us, you receive a piece of mail, and if the organization somehow touches you, you may write a cheque. Around the first of April, we go scurrying into our files to look for those donation receipts to give to the accountant so we can at least get a tax deduction for our generosity. Rarely, if ever, are the two events planned.
The Canadian tax system gives a 17% tax credit on the first $ 200.00 of a donation and a 29% credit on anything above that amount. A credit is a reduction in tax payable. When the two events are planned together, the benefits for both the donor and the charity can be magnified. For example, there was a provision in the 1997 budget to encourage an individual to increase their charitable giving by reducing the amount included in income. If you wish to donate capital property to a charitable organization, such as stocks or mutual funds, the capital gain amount included in income is reduced by half and you still get the donation receipt.
We have all heard the refrain "the only guarantee in life is death and taxes." This is actually a planning opportunity. Canada long ago eliminated estate tax. What replaced it is the capital gain tax. In the year of death, the final tax return must include all unrealized capital gains and the balance in your Registered Retirement Savings Plan or Registered Income Plan. This can and usually does result in a very large and unanticipated tax bill. With a little planning, however, not only can this bill be reduced significantly, but your favourite charity can benefit as well.
In the year of death, there is no restriction on the amount you can donate to a charity. . Any excess can even be carried back to a previous year. A significant donation as part of your will can help eliminate a major tax liability. This donation can even be funded by life insurance, thereby helping you to pass your assets on to the next generation without a major tax burden.
Everyone's situation is different. You should consult with your professional advisor to discuss the many options that are available and to determine what suits you best. The benefit can be significant for you and your chosen charity.
Prepared by Allan Goldbach, Treasurer, Anaphylaxis Canada
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