Charitable donation deadline looming

(December 24, 2004) Clients wanting to make a charitable donation are running out of time, if they want to claim it on their 2004 tax filing. Perhaps a gentle reminder is in order, pointing out that New Year’s Day will be too late.

Canadians tend to be a charitable lot, with 91% making either cash or in-kind donations, according to the Canadian Centre for Philanthropy.

“Charitable donations should be part of a thorough financial plan in which the benefits go beyond tax savings,” said Michael Walker of RBC Financial. “With a sound strategy in place, Canadians can help build a better future for our communities, while at the same time putting money back in their own pockets.”

To that end, RBC is offering tips on “smart giving” strategies, which will allow their donations to go further.

Because the deduction rate is higher for donations over $200, clients should consider bundling their donations to make sure they reach that total. Married clients may choose to combine their donations and claim them in the name of the higher income spouse.

Those who feel they cannot afford to donate $200 in a given year can hold off claiming a lesser amount for up to six years, accumulating donations over that period and claiming them together at once.

Many Canadians wait until the end of the year to make their charitable donations, but the holiday season can be so hectic that good intentions can easily fall through the cracks. Donors might want to consider year-round contributions, which also lessen the impact on their pocketbook by spreading the total amount throughout the year.

For those who think it is simply too late to make a donation, there is always the online option. Many charities are able to accept donations through their website, allowing donors to make a donation for 2004 right up until midnight on New Year’s Eve.

For those whose assets are illiquid, they might choose “in kind” donations of financial assets. Donating stocks to a charity allows the donor to pay lower capital gains tax, with only 25% of the value taxed, rather than the usual 50% inclusion rate.

But in-kind donors should be made aware of a possible change to this rule, as the Senate Banking Committee has recommended the government drop the capital gains tax altogether on donations of financial and real estate assets. The proposal originally came from the Association of Fundraising Professionals.

“We’re not asking for something radical here,” says Tad Brown, finance and development counsel for the University of Toronto and chair of AFP’s Government Relations Committee. “These types of policies have been proven to work. Frankly, we’re asking the government to finish the job it started in 1997, and eliminate the capital gains entirely for these types of gifts.”

“Canadians are accumulating significant wealth in the form of securities and land,” said Brown. “Many donors want to give this type of wealth away, but current laws don’t make it very easy or attractive for them to do so. If enacted, these proposals would create significant incentives for donors to make these types of gifts.”

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com