Donating Securities to Charity
Why donate publicly traded securities to charity?
Historically, donations to charities have been in the form of cash (cheque, e-transfer or credit card). However, as people discover the benefits of donating publicly traded securities (stocks, bonds or mutual funds), these in-kind gifts are gaining prominence as a tax effective way to donate versus cash gifts.
What are the benefits of gifting publicly traded securities directly to a charity?
If you own publicly traded securities, outside of a registered account (RRSP, RRIF, TFSA), that have increased in value since you purchased them, and you donate them in-kind to charity, you’ll realize even more tax savings than you would with a cash gift.
If you sell the securities, 50% of the capital gain will be taxable income. However, if you donate the securities in-kind, the taxable capital gain is avoided, and you will receive a charitable receipt for the market value of the securities on the day you initiate the transfer to Abundance Canada.
Example of Tax Advantages of Donating Securities to Charity:
| Sell securities and donate cash | Donate securities as gift in-kind | |
|---|---|---|
| Donation to charity | $50,000 | $50,000 |
| Adjusted Cost Base | ($10,000) | ($10,000) |
| Capital Gain | $40,000 | $40,000 |
| Taxable Capital Gain | $20,000 (50%) | $0 (0%) |
| Marginal Tax Rate (example) | 40% | 40% |
| Tax Payable | $8,000 | $0 |
NB: In this example, when the securities are donated directly to the charity as a gift in-kind, the donor does not realize a taxable capital gain, saving the donor $8,000 in tax payable. The $50,000 donation receipt can then be used to off-set other income tax payable.
Which securities should I donate for maximum tax savings?
Donate securities that are held in a non-registered investment account. Investments held in a registered account, such as an RRSP or RRIF, do not qualify for these tax savings.
Donate the securities that have the largest capital gain to maximize the tax savings for zero capital gains inclusion for the donated securities.
Capital gains on investments held in a tax-free savings account (TFSA) are already tax exempt. Donating these investments will not generate the same tax savings as donating securities held in a taxable investment account.
Consult with your tax or professional advisors on which stocks, bonds or mutual funds present the best gifting opportunity.
What if my charity of choice cannot accept donations of publicly traded securities?
Many charities don’t have brokerage accounts or the expertise to process donations of securities. Abundance Canada will process the donation of securities, sell them and disburse the proceeds to the charities you wish to support.
You can disburse the proceeds immediately or over a period of years. This works well if you want to receive the tax benefit in one year but fulfill a longer-term pledge.
Even if one of the charities you want to support is willing and able to process these types of donations, using Abundance Canada means that with one transaction you can distribute the proceeds to multiple charities.
You do not need to complete separate security transfers with each charity you want to benefit. This means less paperwork and hassle for you. At tax time, you only have one donation receipt to process and that one donation has benefited multiple charities.
For example, a donor has 1,000 shares of Royal Bank to donate to four charities. The fair market value of the shares is about $100,000.00. Each charity is to receive $25,000.00. If the donor chooses to use Abundance Canada to process the gift of securities, they complete one transfer form for the 1,000 shares and they will receive one donation receipt from Abundance Canada.
If the donor does not use Abundance Canada to process the gift-in-kind, they will need to send each charity 250 shares of Royal Bank, which means four transfer processes and four donation receipts.
What is the process for donating securities?
Abundance Canada makes the process of donating publicly traded securities easy! Our team of gift planning consultants will work with you or your professional advisor to explain our process and work out the details.
Charitable giving via gifts of publicly traded securities is a wonderful way to support your favourite charities plus realize additional tax savings over donating cash.
You can find out more on our Gift of Securities page or contact us to speak with a gift planning consultant in your region.
