5. CHARITABLE DONATIONS OF SECURITIES:
12. WE’RE HERE TO HELP!
from them. This will generally be the higher income spouse.
Whether you wish to donate personally or through a corporation, individually or with your spouse, we’re here to help you make the biggest possible impact with your giving, while maximizing your tax incentives. RBC Dominion Securities Inc.* and Royal Bank of Canada are separate corporate entities which are affiliated. *Member- Canadian Investor Protection Fund. RBC Dominion Securities Inc. is a member company of RBC Wealth Management, a business segment of Royal Bank of Canada. ® / TM Trademark(s) of Royal Bank of Canada. Used under licence. © 2022 RBC Dominion Securities Inc. All rights reserved. This article may contain several strategies, not all of which will apply to your particular financial circumstances. The information in this article is not intended to provide legal or tax advice. To ensure that your own circumstances have been properly considered and that action is taken based on the latest information available, you should obtain professional advice from a qualified tax and/or legal advisor before acting on any of the information in this article.
9. CORPORATE DONATION TAX DEDUCTION:
Gifting shares instead of cash may enhance your tax benefit. When you donate securities in-kind, you may benefit from the elimination of the capital gain accrued on the securities plus the donation tax credit. As such, it may cost you less to make a donation of securities than a donation of cash. Before making a donation in-kind, it’s important to contact the qualified donee and verify that they can accept in-kind donations.
A corporation is entitled to a tax deduction for the donation amount against their income. By reducing taxable income, the corporation reduces their tax liability. A corporation does not need to claim the full donation in a particular year. Donations can be carried forward for up to five years. Generally, a corporation can claim a deduction for charitable donations up to 75% of the corporation’s net income for the year.
6. MECHANICS OF THE DONATION TAX CREDIT:
10. DONATING PERSONALLY OR THROUGH A CORPORATION:
When you make a donation to a registered charity, you can choose to claim a tax credit on your personal tax return. The donation tax credit reduces your federal and provincial income taxes in the year you make the claim. You do not have to claim the donation tax credit in the year you make the donation. You may carry forward unclaimed donations for up to five tax years. This gives you flexibility with regards to claiming your donations. For instance, it may make sense to save all your donations for a higher income year in order to maximize the credit you receive at the higher federal rate.
As previously mentioned, when a corporation makes a donation, it is entitled to a tax deduction against its income. By reducing taxable income, the corporation reduces their tax liability. Personal donation: (tax impact) A non- refundable tax credit is received. The combined federal and provincial tax credits reduce the overall tax liability with a five year carry forward period. The limitations? Generally 75% of net income for tax purposes (100%) for Quebec residents on their provincial tax return.) In the year of death and preceding year, 100% of net income for tax purposes. Corporate donation: (tax impact) A deduction is received. Deduction is equal to the FMV donated, reducing taxable income and the overall tax liability with a caryy forward period of five years. Generally, the limitations are 75% of net income for tax purposes.
7. THE DONATION TAX CREDIT IS NON-REFUNDABLE:
This means the tax credit cannot reduce the amount of your tax below zero.
David Smith, BBA, CIM Senior Portfolio Manager & Wealth Advisor
8. MAXIMIZING THE DONATION TAX CREDIT BETWEEN SPOUSES:
The CRA allows you and your spouse to combine your donations made in a given tax year and the previous five years to the extent you have unclaimed donations for the purposes of the donation tax credit. This enables you and your family to maximize your donation tax credit. If both you and your spouse have made separate donations, considering pooling them and reporting them on the tax return of the spouse who will benefit the most
11. THERE ARE NO RIGHT OR WRONG DECISIONS:
The Smith Team of RBC Dominion Securities Inc. 602- 134 Kent Street, Charlottetown 902.628.1264 david.a.smith@rbc.com www.david-smith.ca
One of the unique things about charitable giving is that there are no right or wrong decisions—only the right decisions for you!
FALL 2022/WINTER 2023 www.pei-living.ca
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