Why we give
Tips for year-end charitable giving
BY KEN FINKELSTEIN
AT THIS TIME of year, it's natural to think about making charitable donations. Many of us give to create meaningful opportunities for others, and to support individuals and causes that are close to our hearts. Equally important, giving leads us to reflect upon how fortunate we are to be able to support those in need. And it has a way of prompting us to be grateful for what we have, not just for our net worth but also for our health, friends and family. Charitable giving may consist of a single donation or several donations spread out over a period of time, such as paying $25 per month for a period of one year to your chosen charity. When thinking about how much to give and to whom, consider the following.
Start by thinking about what is important to you. In this regard, take time to consider what issues you care about and why you would offer support. Because giving is a completely personal issue, there is no right or wrong answer; simply follow your heart.
Ask yourself what kind of gift would be most effective in helping the charitable organization - what would truly make a difference? And when should the gift be made (i.e., today, at a future time while you are living or byway of your will) ? Often, gifts take the form of money. That said, gifts may also be made in other forms, including furniture, clothing, stocks, bonds, mutual funds, real estate and other assets.
Finally, consider how much you can afford to give. And once you've decided which charity(ies) to include on your giving list, figure out how much money, other assets and/or time to give to each charity.
Charitable giving reduces taxes
As a practical benefit, charitable gifts entitle you to a tax credit. And this tax credit goes toward reducing income taxes payable. For the purpose of claiming a tax credit, be sure that:
· The gift is made to a registered charity or other qualifying organization.
· With your tax documents, you file an official receipt issued by the charity.
On its website, Canada Revenue Agency (CRA) maintains a charity list (canada.ca/en/services/taxes/charities.html) that you can search to find out if a particular organization is registered; click "List of charities and other qualified donees:' It's important to note that CRA does not treat all gifts equally. In this regard, the following are not considered charitable gifts for tax purposes and do not qualify for the tax credit:
· Gifts that result in you receiving a personal benefit.
· Property with minimal monetary value.
· Contribution of services, such as time, skills and effort.
· Purchase price of a lottery ticket.
To review the complete list of gifts that qualify for charitable tax credits, see canada.ca, select the "Taxes" tab and click on Charities and giving;' and then select "Making a charitable donation:"
Charitable-giving tax credit limitations
CRA-qualifying charitable gifts are entitled to a tax credit. However, there is a tax credit limit.
The annual dollar limit on charitable gifts is equal to 75per cent of your net income. So, for example, if you have a net income of $40,000, the most you may give to charity that qualifies for the tax credit would be $30,000.
An exception to this rule involves the year of death or the year preceding death, when the amount of charitable gifts that may be claimed as charitable donations is equal to 100 per cent of net income.
To determine the tax credit amount, provincial and federal government credits are combined. Generally, the combined federal/provincial tax credit will be somewhere in the neighbourhood of 40 per cent of the donation amount.
To calculate your exact charitable donation tax credit, go to cra-arc.gc.ca/chrts-gvng/dnrs/svngs/clmnglb2-eng.html. The simple act of giving gives rise to a sense of purpose and well-being. In turn, these feelings deepen a sense of compassion.
Ken Finkelstein blogs at buddhamoney. com.