A Surprisingly Easy Way to Give!

How the donation of stocks at year-end can make a difference for you and the charity.

Tis the season of giving, and many people are considering donating to their favourite charity. In this month’s blog, we want to focus on a method of donating that you may not be familiar with, and it’s actually a pretty straightforward, simple process for the donor – the gifting of securities.

Most people know that the government provides you with a tax credit when you make a personal donation to a registered charity to encourage charitable giving. You can use this donation tax credit to reduce your taxes. Any investment from a non-registered account with a taxable capital gain could be effectively used as a donation and provide savings to you, the donor. The capital gain is the profit you made above what you paid for the investment. You do not have to sell the security by donating in-kind; realize the gain and pay tax on that capital gain. (See the chart below.)

Stephen volunteers with the Calgary Food Bank and has also chosen to donate stocks, “My wife and I used to donate cash regularly, but when I retired from my job at Microsoft and took a look at our financial picture in this new phase of life, it just made more sense to donate stocks.” Stephen added that the culture at Microsoft not only encouraged their employees to contribute to a yearly giving campaign but also inspired their people to find different ways to give back. So, when the pandemic hit and older adults could not come into volunteer, Stephen decided to offer his time as well. He continues to spend part of his week sorting and distributing food while also donating stocks to help feed fellow Calgarians.

Another donor is David, who has been donating stocks to the Calgary Food Bank for years. For him, it’s simple, “There’s a great tax benefit.” Much like Stephen, David says he has had good fortune over the years, and as a result, it’s essential to give back. “There are people who haven’t had the same opportunities I had, so I want to support the Calgary Food Bank, which helps those in need. It’s so important to give a hand-up.”

Many people make stock and security donations in the late fall through to the end of the year; however, a donation must be made before December 31st. If you want to meet the year-end deadline for the current tax season, you should be making arrangements by the middle of December to move the shares. The first step is to complete an in-kind form that can be obtained by your investment firm or your favourite charity. Simply fill it out and the shares are transferred in-kind, and a tax receipt for the value is then issued.

From the donor’s perspective, the process is incredibly easy. If the season inspires you to give and if you have wealth that you want to share, reach out to your investment firm as you can save yourself some income tax and help feed Calgarians who are hungry and need support. Please contact Leah Johnson-Clark, Individual Giving Coordinator, The Calgary Food Bank, for more information or for a copy of the in-kind form.

1) In this example, it’s assumed that taxable income above $200,000 is subject to the top federal income tax rate of 33%; the actual amount is indexed annually. Courtesy RBC Wealth Management.