Tax-Smart Charitable Donations

In Canada, you are able to support helpful charities in a number of different ways. If you go over your donation plan strategically, you can optimize the benefits to both yourself and the charities that mean the most to you. Read on to learn more about strategies involving charitable donations:

Life Insurance Proceeds

If you have permanent life insurance, you are able to donate these proceeds to the charity of your choice, leaving a sizeable donation in your name that can really make a difference. Doing so will allow you claim the Charitable Donation Tax Credit on your annual premiums you pay, or you could choose for your estate to receive a tax credit after you pass away.

Donate Investments

You can donate your investments to a charity as well. If your investment has increased in price, it will come with the added benefit of being exempt from capital gains tax. If your investment has gone from $10,000 to $20,000, you can donate the $20,000 tax-free and also claim a Charitable Donation Tax Credit of $20,000 as well.

Combining Donations

The Charitable Donation Tax Credit is only 15% of your donation for the first $200 donated. Donations made after that are credited at 29%, a significant difference. If you pool all of the donations that you made, you are able to increase the amount of money that is credited at 29%. You are able to combine donations with your spouse and have one person claim the tax credit. It is important to remember that the maximum donation you can claim in one year is 75% of your annual net income (or 100% on the year of your death, or the previous year). Thankfully, you can carry donations forward for up to five years if you need to.

New Rules for 2016

There have been some important changes to donations made upon death, as of January 1st 2016. Previously, tax credits were applied to your final tax return, with all remaining credits applied to the previous year. The donation can now be allocated to the tax year of the estate, a previous tax year of the estate along with the last two years of the individual.

These aren’t the only charitable donation strategies available to you. For advice on how to make the best use of your charitable donations, you should contact a financial advisor at The Beacon Group of Assante Financial Management Ltd.