There might be more than a few of us hanging our heads as we skulk past the Salvation Army kettles, hands in our pockets and eyes averted, after a survey this week pointed out that we are donating not only fewer dollars but also a declining percentage of our income to charity than in prior years.
According to the Fraser Institute’s annual “Generosity Index” released earlier this week, a lower percentage of tax filers donated to charity in Canada (22.9%) than in the United States (26.0%). Similarly, Canadians (at 0.64%) gave a lower percentage of their aggregate income to charity than did Americans (at 1.33%).
So, if your lack of giving during this holiday season is causing you some guilty pangs, there are actually a couple of ways to make giving a bit less unsettling by using the tax rules to decrease your after-tax cost of donating.
If you’re among the almost 75% of Canadians that hasn’t been giving anything to charity or at least haven’t in some time, you can take advantage of the new First-Time Donor’s Super Credit (FDSC). Under the general rules, individuals can claim a non-refundable tax credit of 15% for the first $200 of annual charitable donations. That tax credit rate jumps to 29% for any donations above $200.
But to encourage “new” donors to give to charity, the 2013 federal budget introduced the temporary FDSC which provides an additional 25% non-refundable tax credit for a “first-time donor” on up to $1,000 of donations. A first-time donor is someone who hasn’t claimed a donation credit after 2007. If you’re married or living common law, neither you nor your spouse qualify if either of you has made a donation after 2007. While first-time donor couples can share the FDSC in a particular year, the total amount claimed can’t exceed the maximum allowable credit.
As a result, a first-time donor will be entitled to a 40% federal credit for donations of $200 or less and a 54% credit for donations over $200 up to $1,000. Only cash donations will qualify for the FDSC as opposed to donations of property or donations “in-kind.”
The FDSC is available for donations made on or after March 21, 2013 and the credit can only be claimed once in either 2013 or any year until 2017.
Another option if you have experienced gains in your equity portfolio over the past year is donating appreciated publicly traded shares or mutual funds “in-kind” to charity. Not only will you get a donation receipt for the fair market value of the securities being donated, you won’t have to pay any capital gains tax on the accrued capital gains.
You can also donate any losers to charity and claim the capital loss to be used against either capital gains realized in 2013 or carried back and used against any gains you may have realized in 2010, 2011 or 2012. The capital loss may also be carried forward indefinitely to future years.
Don’t feel bad about unloading those dogs to charity as most charitable organizations will simply immediately dispose of the donated securities and realize the cash which will then be put to use in their charitable activities.
The Fraser Institute’s Generosity Index measures fiscal generosity through two measures: the percentage of tax filers who donated, which measures the extent of generosity and the percentage of income donated to charity, which shows the depth of charitable giving.
The index also broke down the results by province and state. For Canada, Manitoba had the highest percentage of tax filers that donated to charity in 2011 at 25.9% while New Brunswick had the lowest at 20.7%. Manitoba also took the top spot when it comes to the highest percentage of income donated to charity at 0.89% while Quebec came in last place at a paltry 0.30%.
By comparison, Maryland ranked first in the U.S. with 40% of people donating to charity while Utah took the top spot for percentage of income donated at 3.03%.