Published: March 9, 2020
Last Updated: October 25, 2021
Top 2016 Year End Income Tax Planning Tips by Canadian Tax Lawyer Part 2
The charitable sector is key to the quality of life for many Canadians, and it relies on donations from ordinary Canadians in order to function. In this Part 2 of our year end tax planning article our expert Canadian tax lawyers discuss year end income tax planning for charitable donations. While these tax planning techniques are geared towards individuals, it’s important to remember that corporations can and do make charitable donations as well.
Top Canadian Tax Lawyer Income Tax Tips for Charitable Deductions
Accelerate Charitable Donations
Eligible charitable donations that are paid before Jan 1 will provide a charitable donation tax credit in the current year while a delay to after Dec 31 means the tax credit is postponed by a full year. So Canadians should review their expected charitable donations for the first quarter of next year and accelerate those donations to 2016.
Benefit from the Time Limited First Time Donor Tax Credit
The Income Tax Act was amended a few years ago to offer an additional 25% tax credit for charitable donations made by a Canadian taxpayer who has never claimed a charitable donation in the past. This “super credit” will expire in 2017, so individual taxpayers should plan to make use of the benefit before then.
Since the first time donation credit will only be available to any Canadian once, a good tax planning strategy would involve saving up all expected charitable donations for several taxation years to take advantage of the additional credit in one taxation year. This new “super credit” is limited to $1,000. But remember 2017 is the final year that the super credit will be available.
Donate Publicly Traded Shares Instead of Cash
Canadians can donate publicly traded shares to charities and increase their tax benefits. Not only is a charitable donation tax credit available, but by donating shares in this way the disposition will not be subject to capital gains taxation. The ability to donate shares and not to pay tax on the capital gain is a significant tax benefit and is worth almost 25% in tax reduction for a tax payer in the top marginal tax bracket. So if you’re intending on making a charitable donation our Canadian tax lawyer tax planning advice is to consider making it by way of appreciated shares rather than cash.
In Part 3 of this Canadian tax lawyer year end tax planning guide we discuss employment related tax planning tips to benefit Canadians who are employed and provide tips as to how they can reduce their personal income tax burden.
"This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions you should consult a lawyer."