Growing into God’s Future
How to maximize your tax benefits
on donations
Background – Bob Neville
• Worked 33 years at Canada Revenue Agency
• Last 15 years – Tax Specialist in Natural
Resources
• Wendy Neville – Daughter – Chartered
Accountant (worked in public accounting for
the past 7 years – working in personal tax)
Generalities
Federal
• 15% of the first $200
• 29% for excess amounts
Ontario
• 6.05% on the first $200
• 11.16% for excess amounts
Maximize your donation
• Put all donations on one tax return to
minimize the rate on the first $200.
Donations
• Must be eligible donors
– Ie. Must have donation slips with RR0001 after the
name
• Must be paid within the calendar year (January 1
to December 31)
• All donations are non-refundable (meaning in
order to get a refund on your tax return, you
must have tax deducted or paid tax during the
year)
• Donations can be carried forward up to 5 years
Capital Property Donations
• Shares or options of a public company
• Land
• Depreciable property
Donating Shares of Public Companies
• Many of the insurance companies have
demutualization, where the insurer has now
received shares, where the cost (or adjusted
cost basis (ACB)) is $nil or close to zero.
• Capital gains will be significant
• Donations can be made to minimize the tax on
the capital gain.
Example - shares
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Own Sunlife shares with a cost of $0
Pledge is $10,000
Sell shares with a fair market value of $10,000
If sell on own, you have a taxable capital gain
of $5,000 (50% of the capital gain)
• Tax rate at the marginal rate of 41% (tax owing
- $2,050)
Example – shares cont’d
• Now only have $7,950 that you can donate
• Non-refundable tax credit on donation $3,260
– 41% (29% -federal & 11.16% ontario) x $7,950
Example shares - Donation
• Donate - Sunlife shares at FMV $10,000 for
pledge
• If shares are donated to the charity, then
– No taxable capital gain on shares (ie. Do not pay
$2,050 of tax)
– Charity receives $10,000
– You receive a donation slip for the full $10,000
– You receive a non-refundable credit of $4,100
– Note: you must not receive a benefit/advantage from donating (ie.
Receive something for it, this must be offset on the donation slip)
Donations in year of death
• Can be carried back 3 years against any
income (to offset any tax owing)
• Other specific rules apply
Maximize Cash flow
(personal approach)
• Donate close to the year end
• Usage of donations for building fund
– Stagger donations based on pledge, 1/6th in year
one, 2/6th in year two, and 3/6th in year 3
Government Support
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Gift of
Refund
$4000
Gift of
Refund
$1600
Gift of $
Refund
$480
Gift of
Refund of
$190
Gift of
Total gift from You
Total from Government
$10,000
$4000
1600
$480
$190
$10,000
$ 6,270
References
• IT-288R2: Gifts of Capital Properties to a Charity
and Others
– http://www.craarc.gc.ca/E/pub/tp/it288r2/README.html
• P113: Gifts and Income Tax
– http://www.craarc.gc.ca/E/pub/tg/p113/README.html
• T1170: Capital Gains on Gifts of Certain Capital
Property
– http://www.craarc.gc.ca/E/pbg/tf/t1170/README.html