Stern Cohen LLP

Stern Cohen LLP

December 04, 2009 18:21 ET

How to Donate to Charity and Save on Your Tax Return This Holiday Season

TORONTO, ONTARIO--(Marketwire - Dec. 4, 2009) - While most think of the holiday season as a time for spending, a deeper look may find that it can be a time for giving and saving if done before the year's end. Ann Galvin, partner and tax specialist at Stern Cohen LLP, suggests Ontarians consider the following smart ways to donate to the charity of their choice.

Give generously: The more a person gives the more they get back. The first $200 of a charitable donation is taxed at the lowest personal rate. After that, for every $100 donated an individual's tax reported on their income tax return is reduced by about $46. There is generally an overall limit of 75 per cent of income for this tax strategy.

Give money over food: Instead of donating $54 worth of groceries to the local food bank, consider giving a $100 cheque instead. Charities will provide a receipt for the cash donation, which will allow a person to claim a tax credit of $46. This is a win-win scenario with the charity receiving $100 worth of groceries instead of $54 without the donor spending more than planned.

Give winning stocks: While an investor's portfolio may have taken a hit, the donation of stocks traded on public exchanges make for a great donation. These 'in-kind' gifts can garner a receipt for the fair value of the stock and avoid the tax on capital gains. For instance, a donation of a qualified stock worth $1,000 today that was purchased for $200, results in a tax savings of $460. If the donor had sold the stock first and then given the $1,000 cash proceeds to the charity, it would trigger a $400 taxable capital gain and the tax savings would only be approximately $278. The bottom line? Consider donating some investment winners to maximize the tax savings.

Give grandma's old chair: Art, furniture and china are examples of tangible in-kind gifts. If a charity wants these items, they can write a tax receipt for their worth. If an antique chair was inherited when its value was $200 but is now worth $1,000, a tax credit can be obtained on the full $1,000. While it is tempting to rid the house of clutter, especially for a financial incentive, it is not always easy to get a charitable receipt for these items. Call first to inquire with the charity, if not, local shelters would be pleased to receive these items for free.

Stern Cohen LLP was founded in 1963 and is now among the top 50 accounting firms in Canada serving clients in the Greater Toronto Area and beyond. Clients range from multi-million dollar owner-managed corporations to sole proprietorships in industry, finance, culture as well as the professions.

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