Giving to charity: the facts

Charitable giving in Canada

Giving to charity is a strong tradition in Canada. In response to Canada’s economic reality, individuals, organizations, and corporations are stepping up to help fill the funding void that governments have left behind due to cutbacks. And with good reason—not only do charitable donations give people and organizations the satisfaction of giving back to their communities, but Canadian tax laws make it a real advantage to donate.

To help bridge the gap between donors and charities, Manulife Investment Management created this guide on giving to charity—an in-depth overview of how you can optimize your charitable gifts. Through proper tax planning and understanding different giving options, you can work hand-in-hand with charities to get maximum benefits while adding to your communities’ overall quality of life.

What qualifies as a gift to charity?

If you want the tax benefits from your charitable gift, it must be a “voluntary transfer of property without valuable consideration” to a qualified done, like a registered charity. Donations to charity can be things like:

• cash
• gifts in kind (e.g., stocks, bonds, real estate, segregated fund contracts, ecological property)
• certified cultural property (such as works of art, historical or cultural artifacts)
• proceeds of a life insurance contract
• proceeds from a registered retirement savings plan (RRSP) or registered retirement income fund (RRIF)
• bequests from a will

Some gifts may have monetary value but don’t qualify for charitable tax receipts:

• gifts for which a personal benefit will be received (for example, payments to a charitable organization for daycare services)
• personal time or services like consulting work or manual labour
• used clothing, old furniture, or outdated computer parts

There are a lot of things to consider when donating different kinds of gifts. Our detailed guide gives more information about each of these types of donations, advantages or drawbacks, useful tips, and more.

CRA charitable giving guidelines

According to the CRA, a donation to charity qualifies if:

• there’s a voluntary transfer of property to the charity and the property’s value can be clearly determined (this doesn’t include a receipt for a donation of services)
• any advantage the donor receives from the charity must be clearly identified and its value must be ascertainable
• there’s a clear intent to enrich the charity

Tax guidelines for donating to charity

Individuals receive a non-refundable federal tax credit of 15% on the first $200 donated to charity. Donations over $200 qualify for the top federal tax credit rate of 33% if a person’s income is over the threshold for the top marginal federal tax bracket. Otherwise, a federal tax credit rate of 29% will apply on annual donations over $200. In addition, individuals receive a non-refundable provincial or territorial tax credit (amounts differ depending on the province or territory).

In most of Canada, you can claim charitable donations up to 75% of your net income, plus 25% of any taxable capital gains and recapture of depreciation related to the gift portion of the donation of capital property. In Quebec, however, there are no limits on charitable donations that can be claimed while alive.

After federal and provincial/territorial taxes and surtaxes are considered, a person at the top income level can expect tax savings around 50% (depending on the province or territory) for every dollar donated over $200. Donations to charity can be used in the current year or carried forward up to five years (ecological gifts to charity can be carried forward up to 10 years).

Things to consider about charitable donations

Some things to keep in mind when giving to charity:

• Make sure that the charity has a CRA charitable registration number—charities can’t issue tax receipts without one.
• Many charities won’t issue a receipt if the amount of the donation is less than $10.
• Married and common-law couples can pool donation receipts to maximize their tax credits.
• Donors may want to defer claiming small amounts and wait until a future year when the total amount to be claimed will exceed $200.

Everything you need to know about giving to charities

Our handy guide gives you more in-depth information to help you understand the rules and ideas around charitable giving. We cover the areas mentioned above and many other related topics in more detail:

• tax guidelines around charitable gifts
• qualifications of a charity
• determining what’s considered a gift
• options for donations to charity:
  • cash
  • gifts in kind
  • registered plans (RRSPs, RRIFs)
  • bequests
  • charitable gift annuities
  • charitable remainder trusts
  • proceeds of insurance plans
  • life insurance as a wealth replacement strategy

… and much more!

Helping Canadians make informed donation decisions

There are many ways to give to charities, and a little planning can help make sure that your donation dollars go further. Work with your advisor to determine your goals and set up a charitable giving strategy to help you reach those goals.

Advisors, share this guide with your clients to help answer any questions on charitable giving goals and strategies.

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