Presentation on theme: "Growing into God’s Future How to maximize your tax benefits on donations."— Presentation transcript:
Growing into God’s Future How to maximize your tax benefits on donations
Background – Bob Neville Worked 33 years at Canada Revenue Agency Last 15 years – Tax Specialist in Natural Resources Wendy Neville – Daughter – Chartered Accountant (worked in public accounting for the past 7 years – working in personal tax)
Generalities Federal 15% of the first $200 29% for excess amounts Ontario 6.05% on the first $200 11.16% for excess amounts
Maximize your donation Put all donations on one tax return to minimize the rate on the first $200.
Donations Must be eligible donors – Ie. Must have donation slips with RR0001 after the name Must be paid within the calendar year (January 1 to December 31) All donations are non-refundable (meaning in order to get a refund on your tax return, you must have tax deducted or paid tax during the year) Donations can be carried forward up to 5 years
Capital Property Donations Shares or options of a public company Land Depreciable property
Donating Shares of Public Companies Many of the insurance companies have demutualization, where the insurer has now received shares, where the cost (or adjusted cost basis (ACB)) is $nil or close to zero. Capital gains will be significant Donations can be made to minimize the tax on the capital gain.
Example - shares Own Sunlife shares with a cost of $0 Pledge is $10,000 Sell shares with a fair market value of $10,000 If sell on own, you have a taxable capital gain of $5,000 (50% of the capital gain) Tax rate at the marginal rate of 41% (tax owing - $2,050)
Example – shares cont’d Now only have $7,950 that you can donate Non-refundable tax credit on donation $3,260 – 41% (29% -federal & 11.16% ontario) x $7,950
Example shares - Donation Donate - Sunlife shares at FMV $10,000 for pledge If shares are donated to the charity, then – No taxable capital gain on shares (ie. Do not pay $2,050 of tax) – Charity receives $10,000 – You receive a donation slip for the full $10,000 – You receive a non-refundable credit of $4,100 – Note: you must not receive a benefit/advantage from donating (ie. Receive something for it, this must be offset on the donation slip)
Donations in year of death Can be carried back 3 years against any income (to offset any tax owing) Other specific rules apply
Maximize Cash flow (personal approach) Donate close to the year end Usage of donations for building fund – Stagger donations based on pledge, 1/6 th in year one, 2/6 th in year two, and 3/6 th in year 3
Government Support Gift of $10,000 Refund $4000 Gift of $4000 Refund $1600 Gift of $1600 Refund $480 Gift of $480 Refund of $190 Gift of $190 Total gift from You $10,000 Total from Government$ 6,270
References IT-288R2: Gifts of Capital Properties to a Charity and Others – http://www.cra- arc.gc.ca/E/pub/tp/it288r2/README.html P113: Gifts and Income Tax – http://www.cra- arc.gc.ca/E/pub/tg/p113/README.html T1170: Capital Gains on Gifts of Certain Capital Property – http://www.cra- arc.gc.ca/E/pbg/tf/t1170/README.html