Ideal time to donate
If you can still feel charitable amidst all the economic hardships, now is the ideal time of year to consider helping out those less fortunate.
According to statistics just released by the Canada Revenue Agency, there are now nearly 74,000 charities in Canada, excluding private and public foundations, with that number increasing daily. In fact, for 2008, the CRA expects to have received 4,500 applications for charitable status, equivalent to one application every two hours, 24 hours a day, 365 days a year.
With so many choices, it should be easy to find a cause you care about. Be sure to make your donation by Dec. 31 so that you will be entitled to claim a donation tax credit for 2008.
Here's a few quick tips on making tax effective charitable donations this holiday season.
1. Donate more than $200. The amount you donate is eligible for both federal and provincial donation tax credits. For the first $200 of donations you make in a calendar year, the federal donation credit is equal to 15% of the amount given. The provincial/territorial credit varies from 4% to 11% of the amount donated.
Once you've made at least $200 of donations in any year, however, the donation credit jumps to 29% federally, plus between 11% and 21% provincially (ignoring any additional provincial surtax savings).
If you're married or have a common-law partner, you can pool your donations when you file your tax return. This allows you take advantage of the higher donation credit faster.
2. Donating shares or funds in kind. If you donate appreciated, publicly traded securities, as well as mutual funds or segregated funds, to charity, not only will you be entitled to a donation tax credit for the fair market value, you won't have to pay any capital gains tax on any accrued capital gains.
Given current market conditions, however, many of your current holdings may be in accrued loss positions. Remember, you can still donate those to charity by year end for a fair market value receipt and claim the capital loss for 2008, which can be used to offset any gains you may have realized this year, or in 2005, 2006 or 2007. The loss can also be carried forward indefinitely to future years.
Donating in kind has also become a lot easier to do, especially if you're dealing with a major charity. Most brokerage firms now have a special form to complete to transfer the securities in kind while many charities have streamlined their procedures to make in-kind donations as easy as possible.
3. Donate online In a rush to donate? Keep in mind that most major charities allow you to donate online. You can also visit an online donation portal such as CanadaHelps.org. CanadaHelps, a public charitable foundation, serves as a national, online, not-for-profit donation portal that allows you to donate to any of Canada's charities. Since 2000, donors have given over $70 million through CanadaHelps. They will even facilitate donations of securities in-kind.