| Recently there have been a number of disasters
throughout the world that has increased the already large number of
people who are in need of assistance. When you consider the large
number of charities seeking financial support and the various problems
around the world such, as homelessness and starvation, you can be
overwhelmed by the desire to help, coupled with the financial realities
of attempting to do so. The government which grabs a major portion of
our income, in the form of taxes, has put in place some tax breaks which
will allow us to make charitable donations without being faced with a
significant financial burden as a result of having done so. All
donations in excess of $200 receive a federal tax credit of 29%. When
this credit flows through to the calculation of Ontario taxes, the tax
credit is 41%. For those in the higher tax brackets, the calculation of
federal and Ontario surtaxes would also be favourably impacted by
charitable donations and the tax credit could result in marginal tax
savings in excess of 50%.
The government has put in place enhanced benefits of in-kind
donations of securities. This provision will allow you to make a
charitable donation, even if you don't have cash readily available. If
you have securities that have appreciated and you donate them, you will
receive a substantial tax benefit. The taxable capital gain will be
reduced by half and, therefore, the corresponding income tax will also
be reduced by half.
The table below illustrates the tax savings. These savings are based
on the assumption that taxable income exceeds approximately $63,000 and
that there are no capital losses to offset capital gains.
|
Market value of appreciated securities |
Adjusted cost base for tax |
Tax on market sale |
Temporary gains relief
(1/2 of col 3) |
Normal charitable tax relief |
Total tax relief
(co. 4 + 5) |
| $1,000 |
$1,000 |
$ - |
$ - |
$ 516 |
$ 516 |
| 1,000 |
667 |
129 |
64 |
516 |
580 |
| 1,000 |
500 |
194 |
97 |
516 |
613 |
| 1,000 |
250 |
290 |
145 |
516 |
661 |
| 1,000 |
167 |
322 |
161 |
516 |
677 |
| 1,000 |
100 |
348 |
174 |
516 |
690 |
While the donation of appreciated securities results in current
capital gains tax that would not be incurred if the securities were
held, the temporary relief which cuts this tax in half results in a
better after-tax result than if the securities were sold, taxes paid and
then the donation made. You must make your donations on or before
December 31st in order to obtain a deduction on your 1999 income tax
return.
Tax Breaks for Charitable Donations
General Tax Planning Tips
RESP's
The New Foreign Reporting Requirements
Tax Planning for the Owner/Manager
Loans to a Spouse
Consider Buying Assets Before the End of the Year
Pension Adjustment Reversed (PAR)
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