Bolster your finances with charitable givingSubmitted by Agrawal Associates on August 10th, 2018
August 10, 2018
Donating your hard-earned money may seem counterintuitive when considering financial wellness. Shouldn’t that money be used for savings, investments or other business ventures? To many people’s surprise, a well-rounded financial plan may include an aspect of charitable giving and donating your money can actually help your wallet. Below are three reasons to consider charitable giving as part of your long-term financial plan:
1. Foster better budgeting
When your priorities are set, you are more likely to create a budget that allows you to fund those priorities. If charitable giving is a priority, you’ll have to examine your income and expenses and think of ways to allocate funds for your cause. Revisiting your budget will always enhance your overall financial health and keep spending habits in check.
2. Donation tax credit
A great way to reduce your taxable income is by donating to charity. It’s win-win; your donation will help someone who needs it, but it will also benefit your bank account.
In Canada, charitable donations come with both federal and provincial non-refundable tax credits. Federally, Canadians are given 15% for the first $200 of annual charitable donations. The federal credit rate increases to 29% for cumulative donations above $200. Donors who have income subject to the 33% top federal rate (income over $200,000) and who donate more than $200 annually benefit from a 33% tax credit on such donations. Provincial credits are similar, although not all provinces have adopted their top tax rate as their top provincial donation credit rate.
3. Tax-gain donating
This tax-reduction strategy involves crystallizing your winning stocks or mutual funds by giving them “in-kind” to charity. Donating publicly traded shares, mutual funds or segregated funds to a registered charity results in a tax receipt equal to the fair market value of the shares or funds being donated. It also allows you to avoid paying capital gains tax on any accrued gain on the shares or funds donated.
A charitable giving plan can enhance your financial portfolio and make a positive impact in the world around you. In addition to helping those in need, philanthropy builds community, helps business thrive, and leaves donors with a sense of fulfillment. Before the end of the year, sit down with an expert and discuss a charitable giving strategy that’s right for you.