Well, It's beginning to look a lot like Christmas. ...and Christmas is the season of giving!
I want to provide you with some valuable information on the advantages of charitable giving. The first advantage is that it is good for your health. Studies show that giving reduces stress, lowers your blood pressure and increases your happiness. Don't take my word for it - read the article from the Cleveland Clinic. Click Here!
Secondly, there are tax advantages to making donations to qualified organizations in Canada.
Basically, you can claim a tax credit of 15% of your first $200 of donations and 29% on the remainder, up to 75% of your net income. For example, if Bob, who has $80,000 of taxable income and is a resident of Alberta, makes a $5000 donation to a registered charity he will get a federal tax credit of $1422 and a provincial tax credit of $1028. That is a total of $2450. You can CLICK HERE to access the online CRA charitable giving tool to calculate your potential tax savings.
The tax credit is called a non-refundable tax credit, meaning that it can only be applied to reduce taxes owing. If you do not have any taxes owing than the tax credit is of no value to you. If you have no taxes owing you would be better off holding onto your giving receipt for a future year. You can carry forward a receipt for up to 5 years. Here's an idea for those of you with larger RRSP's. You can save up your donation receipts and use them to offset taxes on an RRSP withdrawal within the next 5 years.
If you have a spouse, either of you can claim the giving receipts, usually, the spouse in the higher tax bracket should use the receipts as this will produce a bigger tax refund. In the year of death, a taxpayer can make a donation in the amount of 100% of their income, which can be hugely beneficial as there can be significant taxes owing because of the deemed disposition of assets upon death. Be sure to talk with your tax professional to ensure that you are qualifying for all of the tax savings available to you.
Donations made before the end of December can be used in the current tax year. Most registered charities issue a receipt for a minimal donation of $20. When you give $5 or $10 randomly, you are forfeiting your potential tax savings. Nancy and I have always been generous with supporting our causes. Besides our church, we sponsor 2 children and locally, we support organizations like the Mustard Seed, Dream Centre, and Teen Challenge.
This Christmas of 2018 we will be making a donation to a new charity that we were recently introduced to called, Opportunity International Canada. This organization operates in 20 Third World countries offering small business loans to individuals, mostly women, to help them start a business and lift their families out of poverty. Check them out here to learn more about the amazing stories of success.
We think poverty hurts and that people need a hand up not just a handout. We firmly believe that the foundation of financial success should be giving back generously.
Retirement Income, Investment & Tax Planning,
Willis J Langford BA, MA, CFP
Nancy Langford CRS
