Maximize Your Charitable Giving: Tax Benefits of Non-Cash Donations

Barbara Britto

Charitable giving is a meaningful way to support causes you care about—and in Canada, it can also be a strategic financial decision. While cash donations are common, gifting appreciated securities or valuable personal property such as jewelry can provide enhanced tax advantages. Donating these assets directly to a registered charity allows individuals to avoid capital gains tax and claim a charitable donation tax credit based on the fair market value of the gift.  But they might be surprised by the AMT - Alternative Minimum Tax.  That’s where a tax specialist and a great income tax calculator comes in.

Why Donate Securities?  Contributing publicly traded securities—such as stocks, bonds, or mutual funds—is one of the most tax-efficient ways to give in Canada. When securities have appreciated in value, donating them directly to a registered charity allows you to:

• Avoid capital gains tax on the appreciation.
• Claim a charitable donation tax credit for the full fair market value at the time of donation.

Example. Mary purchased shares for $2,000 several years ago. Today, they are worth $10,000. If she sells them, she’ll realize an $8,000 capital gain and owe tax. But if she donates the shares directly:

• The charity receives the full $10,000.
• Mary pays no capital gains tax.
• She can claim a $10,000 donation tax credit, with unused credits carried forward up to five years.
• Depending on her income, though, she may be subject to the Alternative Minimum Tax.  Be sure to check this out – is taxable income in the 29% tax bracket federally?

Donating Jewelry and Other Personal Property. Jewelry, artwork, antiques, and other personal property can also be donated, though the process is more detailed. To claim a credit, donors must:

1. Give the property to a registered charity that accepts non-cash gifts.
2. Obtain a qualified appraisal to determine fair market value.
3. Ensure the item was not inventory or used in a business, which can change the tax treatment.

Example. Mary owns a vintage necklace appraised at $5,000. She donates it to a charitable organization. Because she held it for personal use:

• She may claim a $5,000 donation tax credit.
• She avoids capital gains tax if the item appreciated.

Different rules may apply if the property was used in a business or acquired for resale.

How to Report the Donation on Your Tax Return

1. Confirm the Charity’s Status
Verify the organization is a registered Canadian charity with a valid CRA registration number.

2. Gather Required Documentation

• Securities: Broker transfer confirmation and valuation.
• Personal property: A written appraisal from a qualified appraiser.
• Charity receipt: Must include a description of the property, fair market value, date of donation, and the charity’s CRA registration number.
• Appraisals and back up documentation for gifts in kind.

3. Complete the Tax Return

• Report donations on Schedule 9 – Donations and Gifts (amount flows to Line 34900 of the T1).
• If applicable, report dispositions of capital property on Schedule 3, noting that donations of publicly traded securities are exempt from capital gains tax under subsection 38(a.1) of the Income Tax Act.  However, Schedule 9 must be properly completed first to enable the correct results on Schedule 3.
• Complete Form T1170 to calculate the capital gain or loss on gifts of publicly traded securities or other eligible capital property and apply the reduced inclusion rate (often zero).

Key Considerations.  Remember accurate valuation is essential—CRA may challenge inflated appraisals. Also consider the charitable donation net income limits:  You can claim donations up to 75% of net income, with a five-year carry forward, except in the year of death.  In that case use 100% of net income in the final return and the immediately prior year.

Bottom Line. Donating securities or valuable personal property can significantly boost your charitable impact while reducing your tax burden. Whether you’re planning a year-end contribution or building a long-term giving strategy, consider consulting a tax advisor to ensure your donation is structured for maximum benefit.