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Growing into God’s Future

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

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Growing into God’s Future

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  1. Growing into God’s Future How to maximize your tax benefits on donations

  2. 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)

  3. Generalities Federal Ontario 6.05% on the first $200 11.16% for excess amounts • 15% of the first $200 • 29% for excess amounts

  4. Maximize your donation • Put all donations on one tax return to minimize the rate on the first $200.

  5. 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

  6. Capital Property Donations • Shares or options of a public company • Land • Depreciable property

  7. 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.

  8. 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)

  9. 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

  10. 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)

  11. Donations in year of death • Can be carried back 3 years against any income (to offset any tax owing) • Other specific rules apply

  12. Maximize Cash flow (personal approach) • Donate close to the year end • Usage of donations for building fund • Stagger donations based on pledge, 1/6th in year one, 2/6th in year two, and 3/6th in year 3

  13. 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

  14. 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

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