On June 25, 2024, the capital gains inclusion rate increased from 50% to 66.6%. Many Canadian investors sold public securities to crystallize gains at the lower tax rate. As the end of the year approaches, some of these investors are thinking about making an exceptional donation to offset the tax that was incurred in the spring.
An in-kind donation of appreciated public securities is the most tax-effective way to make a simple donation to charity. For an individual, this kind of donation produces two tax savings:
- a donation tax credit (up to 54% depending on the donor’s income and province)
- nil capital gains (up to 33% depending on the capital gain).
If the donor is a holding company, it would receive a tax deduction, not a tax credit. Corporations also receive a third tax benefit: a tax-free dividend. The full value of the capital gain associated with the securities may be added to the corporation’s Capital Dividend Account (CDA), which enables tax-free distribution to shareholders.
This fall, Aqueduct Foundation is seeing an increase in donations post capital gains crystallization. Simply put, the best time to give is when there is a big tax bill. A donation to offset taxes allows you to choose how you want to contribute to society.
Aqueduct would be pleased to discuss your situation and see if a donation and a donor advised fund makes sense. Contact us for more information.
