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Invest Well. Live Well: Charitable giving — give more with less

We are trying to help each of you achieve your goals in the most tax-effective way
Eric and Keith Davis

For many of us, giving is an important part to help build a better society. Our team is passionate about philanthropy and, generally, there are three ways people can give:

• Time (volunteering);

• Talent (sitting on a board or committee);

• Treasure (donating cash or an investment).

Since 2015, our clients collectively have donated various stocks and mutual funds from their portfolios that have exceeded $2 million. These funds have gone to so many worthwhile causes, such as cancer research, education, pets, hospitals, hospice, Alzheimer's research, the food bank, churches and many more. We track these gifts to help ensure clients are maximizing all their tax credits.

Canadian income tax brackets typically range between 20 per cent and 54 per cent. B.C. residents who have donated more than $200, receive total charitable tax credits of 43.7 per cent.  Furthermore, if you donate (transfer) a profitable investment in kind, the government forgives your capital gains tax.

Here is an example of a B.C. donor with a net income of more than $100,000 who already donated $200 and would like to make another donation in the amount of $10,000. They have the choice of a writing a $10,000 cheque or donating shares held in their portfolio that are currently worth $10,000, but only cost $2,000 originally.

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You may be surprised to learn that your actual out of pocket costs are significantly less than the actual donation amount. Using the same example with an income earner of $50,000 would still result in a net cost of donation of $5,630 and $4,501, respectively . The key is that donating $1 costs you, at most, 56 cents, but could be much lower depending on your income tax bracket. It is worth adding that donating through a business or holding company can also provide tax efficiency. 

How much should I give?

We often get asked this question and offer some ideas to consider:

• One per cent of your income;

• Setup automatically monthly giving;

• Give profitable securities (shares) directly that can have significant tax benefits;

• Pool tax receipts on the highest income tax return;

• Consider donating through your corporation;

• Change RSP-RIF beneficiary to the charity of your choice;

• Use life insurance to enhance the amount you give;

• Make a bequest in your will and ask yourself: “If I decided to give 10 per cent to my favourite charities, would my two children mind receiving 45 per cent as opposed to 50 per cent?”

Please know that we are not here to push anyone to donate; rather, we are trying to help each of you achieve your goals in the most tax-effective way. We enjoy being a part of our clients' journey and encourage them to give while they are alive, so they can see and feel the benefits. Our hope is others will be inspired to do the same. In particular, their loved ones will know that giving back is a family virtue — a lesson that is particularly important this year. 

We would like to leave you with this quote from Winston Churchill: “We make a living by what we get, but we make a life by what we give.”

Until next time, Invest Well. Live Well.

Written by Eric Davis.
The views expressed are those of Eric Davis, senior portfolio manager and senior investment advisor, and Keith Davis, associate investment advisor, TD Wealth Private Investment Advice, as of Nov. 16, 2022, and are subject to change based on market and other conditions. Davis Wealth Management Team is part of TD Wealth Private Investment Advice, a division of TD Waterhouse Canada Inc. which is a subsidiary of the Toronto-Dominion Bank. For more information, call 250-314-5124 or email keith.davis@td.com.