The end of the year means many things to all of us. Often, we think of time spent with family and friends celebrating the season or thinking of the year that’s been. What the end of the year is also, is a time to start thinking about the upcoming tax season.
While the 2023 tax deadline isn’t until the end of April, the deadline for donations is on December 31st of this year, which makes it a busy time for donors to get those last-minute donations in. For some it’s an annual tradition; for others it may be the first time. Let’s look at some tips and tricks to help you leverage charitable giving to reduce your taxes.
- Are you a first-time donor? If so, a first-time donor super credit is available to you. It provides an additional 25% credit on donations up to $1000. You are considered a first-time donor if you have not claimed the Charitable Donation Tax Credit (CDTC) in the past five tax years.
- Do you and your spouse share a bank account from which you make donations? You can give up to $200 to receive the credit at the lowest tax rate. Donations higher than $200 have the credit calculated at a higher rate.
- Do you have stocks? When you dispose of shares, you’re usually taxed at the capital gains rate. For example, if you purchased shares for $80 and sold them for $100, you have a capital gain of $20 and pay tax on 50% of that, or $10. But if you donate these shares to a charity, there may be an inclusion rate of 0% if you didn’t receive an advantage for the gift. It may be better to donate your investments directly than sell them to donate the cash, to avoid paying tax on the capital gain.
If you already have a charity that you give to at the end of the year, that’s great. They’re lucky to have you. Carefor is grateful to those who donate to us, whether one-time, annually or monthly.
Donating to Carefor benefits both you the donor and Carefor the charity. Any cash donation to Carefor received this year and before December 31, 2022, means you may receive as much as 53% back through charity tax deductions.
For even more impact on your tax savings, stocks, and other publicly traded securities such as mutual funds and bonds may also be donated to Carefor. This allows you to eliminate the capital gains tax and still receive a tax receipt for the fair market value (this is calculated the day it is received by our broker so a few weeks before the end of December is best).
Of course, we don’t always have a lot of disposable income in December which is why we encourage our wonderful donors to spread out their donations over the year through our monthly giving program. If you were to donate $100 per month (as an Ontario resident) then your tax credit eligibility is $441.70.
While donations to Carefor can benefit you, the end goal is to benefit seniors and people living with disabilities lead better lives. Donations to Carefor can help significantly with training for our homecare staff; subsidies for seniors who can’t afford some programs and services such as transportation and adult day programs for people with dementia; making sure low-income seniors have housing they can afford; and providing meals to isolated seniors.
We encourage you to speak with your financial planner to find out what is best for you and your family. Thank you for your ongoing commitment to Carefor.
Disclaimer: This was written as a general article, percentages and tax credit eligibility may differ depending on different financial situations and household income.