It's that time of year to open our wallets. Not-for-profit organizations are looking for support after seeing the recession take a toll on charitable giving. According to a Statistics Canada report released on Monday, the overall value of charitable donations dropped 5.3 per cent last year.
"Charities definitely need it, and donation receipts have to be issued by December 31 to be used towards your 2009 tax bill," says Carol Bezaire, vice president tax and estate planning at Mackenzie Financial. "It's a perfect time to plan and think about it now."
When you think of donating to your favourite charity, keep in mind that it doesn't just have to be a gift of cash. There are many options for donations and here are a few of the less common strategies:
1. Give the gift of stocks and mutual funds
If you have shares of a publicly traded stock or mutual fund that has grown in value, you can gift them. In 2006 the government eliminated the capital gains on appreciated securities that are donated. You can benefit by giving the appreciated shares directly to the charity instead of liquidating the position and donating after-tax proceeds.
Securities that are listed on all major exchanges qualify for this incentive and the transaction is typically a simple electronic transfer of shares. You'll receive a donation receipt for fair market value of the shares, which is usually determined by the closing price on the day the gift is received by the charity.
It could take longer, around 10 days, to transfer mutual fund units from a donor to your charity. You may need to work with a financial advisor to complete the mutual fund company forms to make the transfer. The value of the gift will be determined by the date the units are re-registered in your charity's account at the mutual fund company.
2. Put charity in your will
You can leave a donation to your favourite charity through your last will and testament. It is, of course, an option for giving that you hope not to see through for many years. However, it does give you the opportunity to leave a legacy behind. Before putting making a charitable bequest, you need to give some thought to what kind of bequest you wish to make.
There are general bequests, in which you designate a specific dollar amount or percentage of your estate to certain causes. A specific bequest is when you designate a particular item or property for a certain use, such as giving an instrument to a local school's music program.
To ensure your final wishes are carried out properly, make sure you name the recipient of your bequest properly. For example, a bequest to the United Way might see your money go to the corporate headquarters. Be specific if you intend your donation to go to the local chapter of the organization.
3. Donate real estate
Have an investment or vacation property that you're ready to divest? If you're looking for a significant way to donate to a charity, you can give real estate. Charitable gifts of real estate can range from your personal residence, to vacation homes and rental properties, or even farmland.
You can expect to receive a donation receipt for the fair market value of the property. This may not be a simple process, however. Typically, charities will commission at least one independent appraisal of the real estate.
Also, while Canada has fairly generous tax rules to encourage taxpayers to make charitable donations, real estate is one area that has been left behind. If your gift is a principal residence, no capital gains will be triggered. But for most other types of properties, there will be a taxable capital gain.
Ms. Bezaire suggests selling the property and donating the proceeds to the charity instead of gifting the real estate directly. "Deal with the capital gain before you donate the property," she says. "A lot of charities aren't set up to accept property."
4. Donate your clunker
If you have an old vehicle you'd like to get rid of and benefit charity at the same time, there's a way to do it. Car Heaven, a program of the Clean Air Foundation, will send the proceeds from the sale of your car's parts to an affiliated charity of your choice. Since launching in July, 2000, Car Heaven has raised over $3-million for charities across Canada. If your car model is 1995 or older, you'll receive a $60 tax receipt.