Thinking of donating to charity? Gifts of securities (e.g., publicly traded stocks or ETFs) with substantial capital gains offer significant advantages over cash donations:
Tax credit: Like cash donations, gifts of publicly traded securities qualify for a non-refundable tax credit.
* Note that if you are in the highest federal tax bracket, the federal tax credit can be as high as 33% (instead of 29%) on a portion of your donation.
Tax-exempt capital gains: Unlike cash gifts, making a gift of securities allows you to avoid capital gains tax and therefore your gift costs you less than if you would have sold them.
Additional benefits: The tax advantage is even greater if capital gains avoidance preserves other income-related benefits, such as Old Age Security (OAS) pension.
To maximize the benefits of gifts of securities, keep the following points in mind:
Donation in kind: Transfer the securities directly to the charity's brokerage account before December 31st, to declare the donation in the same tax year. Plan ahead, as the donation may take a few days.
Strategic choice: Select securities with the biggest capital gains.
Registered charities: Ensure that the chosen charity is registered with the Canada Revenue Agency (CRA) to receive official donation receipts for tax credit purposes. Click here to access the list.
Combine your donations, it can be more tax efficient! You can combine your donations with those of your spouse and declare them on the tax return of the person with the higher income, thereby obtaining a larger tax credit.
Reminders for your tax return:
Do not forget to keep your donation receipt.
The capital gain triggered by the donation will be included on your tax slip (the T5008), but it will not be reported as a donation. Remind your accountant to make the link between the triggered capital gain and the donation receipt, as this can be overlooked.
You can also take this opportunity to check with your accountant whether it would be advantageous to spread the tax credit over several years, rather than using it in a single year. You can keep all your donation receipts and declare them for future years (up to 5 years).
If you have any questions or would like to discuss a potential donation, please do not hesitate to contact us!
IMPORTANT DISCLAIMERS
Patrick Racicot and Loïc Poupart are attached to PEAK Securities Inc. PEAK Securities Inc. is a full-service investment dealer registered with CIRO, limiting its responsibilities to investment products such as stocks, bonds, ETFs and mutual funds. PEAK Securities Inc. is a member of the Canadian Investor Protection Fund (CIPF). Services available only to residents of Quebec and Ontario. Consult our privacy policy.
The information contained in this document has been prepared by Patrick Racicot, Portfolio Manager, and Loïc Poupart, Investment Advisor, attached to PEAK Securities Inc. It has been obtained from sources believed to be reliable and relevant. The information in this document is of a general nature and may not be complete with respect to your personal situation. This document does not constitute investment advice. The opinions expressed herein do not necessarily reflect those of PEAK Securities Inc. PEAK Securities Inc. is not responsible for the content of this document.