Charitable Donation Tax Credit
While there are rules governing gifts other than cash, you can contribute almost any property of value (i.e., securities, RRSPs, RRIFs, life insurance and real estate) to Falls Brook Centre, which is a registered charity! The charitable donation tax credit can be claimed for all donations up to 75% of your net income for the year. Donations that cannot be claimed in a given tax year can be carried forward for up to five years. Furthermore, in the year of death and in the year prior to death, the maximum donation increases to 100% of net income. The federal tax credit is calculated at the top marginal rate, regardless of your personal tax rate.
Donating Appreciated Securities
Capital gains can be eliminated when you donate qualifying publicly traded appreciated securities directly to Falls Brook Centre. By donating the security directly to Falls Brook Centre, versus selling the security and donating the proceeds, you can avoid paying the tax on any capital gains that would otherwise be incurred on the eventual sale of the security.
There are two common ways to donate a life insurance policy. One is to make the charity the owner and beneficiary. The other is to have the insured as the owner and Falls Brook Centre as the beneficiary. Where the insured transfers ownership to, and designates Falls Brook Centre as the beneficiary, a taxable disposition may arise. However, a donation receipt based primarily on the cash surrender value of the policy is issued and all future premiums paid by the insured are considered charitable donations eligible for a charitable tax credit. A life annuity can also be used as part of a charitable gift plan. The benefactor would use a portion of his/her capital to buy a life annuity to provide a lifetime stream of income. The remaining portion of the benefactor’s capital could then be donated to Falls Brook Centre. The result is that the benefactor is able to make a significant gift without impacting his/her income needs.
Business Owners Strategies
Falls Brook Centre has partnered with 1% for the Planet, whose mission is to build, support and activate an alliance of businesses financially committed to creating a healthy planet. Check out how Johnston Chiropractic has used this programme to do some serious good.
Canadian business owners should also be aware that similar tax incentives as those for individuals exist for corporate donors, including the elimination of capital gains on a qualifying gift of publicly traded securities. Notably, however, a corporation will not receive a tax credit for charitable gifts; instead, the corporation will be entitled to a deduction equal to the value of the gifted property. This will result in a reduction of the tax that would otherwise be payable on income earned by the corporation, so it’s important to take into account the rate of corporate tax paid. Similar to individuals, corporations are also restricted on the amount of charitable deductions claimed annually. A corporation can deduct charitable donations, up to a maximum of 75% of its current year net income, with the potential to carry forward any excess for up to five years.
If you wish to contribute to FBC in any of these ways, please contact our Executive Director.