Making the Most Out of Your Charitable Giving

November 25, 2011

By Heather Compton

November is a great month to talk about charitable giving as November 15 marked National Philanthropy Day across Canada and around the globe. It’s a day designed to recognize the work of charities, volunteers and philanthropists and to pay tribute to the donations of time, talent and treasure that make our world a better place.

The Association of Fundraising Professionals says it best, “Change the world with a giving heart.” Philanthropy is clearly not just about money, rather it covers the giving gamut – donating gently used household items or clothing; acting as a driver or snow angel; sharing your time or your skills, your experiences or your ideas; acting as a mentor or teacher or role model to support the personal growth and build the confidence of those looking for positive change in their lives.

There are other ways to contribute – donating your Canadian Tire “money” or your air miles and some credit cards provide cardholders with the ability to donate their points to charities. There are lots of ways Canadians show their giving hearts but regretfully most of them won’t result in a deductible tax receipt.

A Strategy for Charitable Giving

A recent Leger Marketing study conducted for BMO Harris Private Banking found that Canadians gave an average of $487 to charitable organizations in the last 12 months with the majority planning to donate the same or more in the year ahead. It also found that most of us don’t really have a strategy or plan for our giving.

My husband and I had many debates before deciding that causes related to food, housing and education were going to be the focus of our giving. We also determined that 1/3 of our funds would go to local initiatives, 1/3 to national and 1/3 to international causes. I guess we have a fondness for thirds as we also agreed that 1/3 of the revenues we earned through our Retirement Rocks! seminars would be donated so that the work we love to do would fuel the causes that we care about. It gives us a greater sense of purpose in what we do.

Of course we have friends, neighbors and family members that are regularly participating in a variety of fundraising events and we have a planned budget to support them. When the budget runs out we regretfully decline further requests with a promise to remember them in next year’s giving plan.

Having a clear focus and a plan gives us great freedom in declining requests that don’t meet our mandate or our budget and it also translates into larger contributions to fewer organizations, ones we find meaningful. It’s a very satisfying way to give.

Choosing a Charity to Support

Making the Most Out of Your Charitable DonationsWe all need to choose our causes – according to a recent article in the Calgary Herald there are presently 85,630 registered charities in Canada! As contributors many of us want and need help sorting through the thousands of causes vying for our hard-earned dollars and we want to know how efficiently or prudently our selected causes utilize the dollars that come their way.

A new on-line service can help. Charity Intelligence Canada will provide information on 100 of Canada’s largest charities, with plans to increase their coverage to 1000 charity reports over the next three years. Their one page analysis will cover details such as the organization’s willingness to disclose financial information, staff salaries and how donated dollars are spent.

Money Sense, a Canadian personal finance magazine also weighed in on Canada’s Top 100 Charities with a comprehensive rating system and plans to update their report annually.

Making the Most out of Your Charitable Donations

Be sure to carefully file your donation receipts for tax time. No receipt, no claim.

Donations can be claimed by either spouse regardless of who made the donation but it is much more tax effective if the higher-income earner claims all contributions. The federal tax credit is calculated at the lowest marginal rate for the first $200 and 29% on any amount over that. Now add in the provincial credits for your province of residence. If you have a small donation amount it may make more sense to carry the contributions forward to future tax returns in order to earn a bigger credit. Keep track though, you can only carry forward up to five years and then you’ll lose the deduction.

Recent federal budgets have fully eliminated the capital gains tax on donations of publicly traded securities to a registered charity. These include shares, bonds and mutual funds. Donating securities is more advantageous than selling them and donating the cash proceeds because the capital gain on the donated securities is tax-free – that means you get a deduction for the full market value of the shares even if you paid less for them.

Watch for news of future government plans to extend this benefit to donated shares of private companies but nothing is in place as yet.

Leaving a Legacy

We can be generous throughout our own lifetime…and beyond. There are many ways to leave a legacy – family foundations, gifts of Life Insurance policies, endowments – a little or a lot and our gift goes on giving.

About the Authors: Heather Compton has presented seminars on financial and retirement lifestyle issues for over 30 years. She retired as Vice President and Senior Investment Advisor with a major financial services company. Heather and husband Dennis Blas co-present retirement seminars for a variety of corporate clients and are the co-authors of Retirement Rocks! Canadian Boomers Invest in Life. You can find their book online or in independent bookstores. See more of their advice at Retirement Rocks.

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