Bolster your finances with charitable giving

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.