To gain any tax benefits, gifts must be directed to one of the 85,000 charitable organizations authorized by CRA to provide tax receipts for donations.
Gifts made during the donor’s lifetime (inter vivos) are eligible for a tax credit up to 75% of the donor’s net income. Any unused excess can be carried forward for 5 years.
Gifts made on death (testamentary) are eligible for a tax credit up to 100% of the net income for the year preceding death.
Normally a tax must be paid on 50% of the capital gains realized upon disposition when publicly traded securities appreciate in value. When gifting the shares to charity no tax is paid on the gains realized and the tax receipt will represent the full value of the securities.
Gifts of certified Canadian cultural property and of environmentally sensitive land may be eligible for a tax credit for up to 100% of net income in the year of the gift. This type of gift is exempt from capital gains tax.
For gifts of appreciated property i.e. real estate or shares of privately held companies, Federal Budget 2015 proposes to exempt individuals or corporate donors from Capital Gains Tax on the sale of private shares or real estate to an arm’s length party if the cash proceeds are donated within 30 days. If a portion of the cash proceeds is donated, the exception to the Capital Gains will apply to that portion. This measure will apply in respect to donations occurring after 2016 and including a future reversal of the exception in the event the donor re-acquires property that had been sold.
Gifts of life insurance donated to a charity are eligible for the inter vivos rules above if the donor wishes to obtain tax relief on the donations/premiums as made; or eligible for the testamentary rules above for the entire face amount/mortality benefit, if no tax relief is taken on the deposits.
A charitable gift annuity allows the donor to make an inter vivos planned gift to the charity today (generally 25% to 30% of the gift) whilst retaining an income for themselves. Any portion utilized personally is not eligible for tax credits.
Similarly an irrevocable inter vivos Charitable Remainder Trust allows the donor to donate cash or other property to the charity; but to receive income (taxable to the donor) if the assets are investable or retain enjoyment if for example works of art. The immediate tax credit is based upon the residual interest which passes to the charity upon the death of the donor.
The above list is exemplary and by no means exhaustive; however the below is generally representative of the spirit of all donors:
“It is a wise and visionary man who plants oak seedlings whose shade he will never enjoy.” Greek proverb
