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Money Management

Government Incentives for Charitable Giving

September 27, 2013

The Government of Canada continues to encourage Canadians to give to charities. Below are two such incentives...one has been in existence for some time and the other is new in 2013.

Donating publicly held securities  

Perhaps you have some shares in your Safety Deposit Box that were provided to you when the life insurance company that you had a policy with demutualized or you worked for a company that provided shares. Maybe you have a brokerage account where your shares or mutual funds have accumulated capital gains. You can donate these shares to your favorite charity and by doing so eliminate capital gains and obtain a full contribution receipt for the value of the securities.

Below are two scenarios to illustrate how it works:

Sell securities and then donate net value to charity:   Transfer securities to charity and then have the charity sell securities:  

Sale price of security 
Original purchase price
Capital Gain
 ½ Capital Gain is taxable 
Tax payable (39%*) 
Net proceeds to donate
Tax credit (50%**)

$10,000
$2,000 
$8,000
$4,000
$1,560
$8,440
$4,220

$10,000
$2,000
Capital gain eliminated
No tax payable
No tax payable
$10,000
$5,000

*Top marginal tax rate in Alberta
**Combined federal and provincial tax credit for Alberta. Assumes sufficient taxable income.


In addition to being able to provide $1,560 more to charity, by transferring the securities to a charity would result in $2,440 more in tax savings over selling the securities first. Some clarification: publicly-held securities are bonds, stocks and mutual funds and for this example are held outside of a registered plan such as an RRSP or TFSA. The charity you wish to donate the shares to needs to have a brokerage account to facilitate this. 

First-Time Donor’s Super Credit
To encourage Canadians who have never given to charity, the Government of Canada has introduced a temporary First-Time Donor’s Super Credit for up to $1,000 of monetary donations in the 2013 federal budget. The new credit effectively adds 25% to the rates used in the calculation of non-refundable charitable donations tax credit (CDTC). As a result, first time donors in Alberta will receive $100 on the first $200 of charitable contributions (15% existing federal + 25% First-Time Donor’s Super Credit + 10% existing Alberta = 50% x $200) and $600 on the next $800 in contributions (29%  existing federal  + 25% First-Time Donor’s Super Credit + 21% existing Alberta = 75% x $800). If a first-time donor donates $1,000 they will receive a $700 refund/tax savings or in other words a $1,000 donation only ‘costs’ $300 provided the donor’s taxable income is over approximately $18,000.

An individual is considered a first-time donor if neither the individual nor the individual’s spouse has claimed the CDTC in any of the five preceding years. Taxpayers can only claim the First-Time Donor’s Super Credit once from the 2013 to 2017 taxation years.


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