You are a donor, aren't you? Have you ever considered that making a donation can be part of a tax-saving strategy?
The Giving Report 2022 by Canada Helps.org highlights the challenges being faced by charities due to the pandemic and inflation. One in four Canadians expects to give less in 2022 than they did in 2021. The overall "giving" percentage has dropped nearly 12% since 2019.
Today’s edition of Finance from A to Z is about one particularly important "C" of Finance.
C is for Charitable Giving:
When I think about charitable giving, I try to think about it from a variety of perspectives. As an individual or an organization, what can we do to contribute to our community?
Did you know that we can claim charitable donations on a tax return? Absolutely, we can. There are two different terms to understand: tax credit and tax deduction.
A tax deduction reduces the amount of income that is subject to income tax whereas a tax credit reduces the amount of tax owing. So, one needs to owe taxes in order to claim tax credits.
As a taxpayer, we claim a tax credit when we report a donation on our tax return. Also, donating to any charity won’t give a tax break. To be eligible for a tax credit, the receiving organization must be a registered charity.
Donations can either be in the form of cash, stocks, property, insurance policies, or cultural gifts.
As a donor and a taxpayer, there is some significant information that you must have when filing taxes such as the charity's name and address, an official statement of receipt, the charity’s registration number, the name and address of the donor, gift amount, a brief description of the gift, and the date the receipt was issued. This information helps in claiming donation credits.
Now, speaking of corporate philanthropy, the most common examples are matching gifts and volunteer grants. Many companies will match donations to non-profits that their employees make, while others give grants to their employees who volunteer. Corporate social philanthropy reflects a company’s specific initiatives and its responsibility toward the community.
For instance, Green Shield Canada matches donations to most schools and non-profit organizations, including K-12 schools, arts, and cultural organizations.
One of the interesting findings from the Giving Report highlights the perception of the younger generation towards philanthropy. According to Canada Helps, the younger generation donate to social causes as opposed to specific institutions. If they have the means, they donate. They have a tendency to give in response to urgent needs.
It is likely that young donors will continue to give in the future as well, whereas older generations are likely to reduce their giving given the financial situation in the future.
Let us know in the comments your thoughts and what else would you like to hear when it comes to the C’s of finance and stay tuned for our "D's of Finance" next week!