Charitable Giving
Give to charity by way of flow-through shares
& receive additional tax deductions
Charitable giving is a popular way for Canadian investors to donate to
the charity of their choice and at the same time receive additional tax
savings. Shares of a mutual fund corporation, such as those to be
received by investors at the time of the mutual fund rollover
transactions qualify for charitable giving.
Charitable donations
should be limited to 75% of net income, in any given year. Amounts
donated in excess of 75% are not deductible in the year of donation and
are carried forward for up to 5 years.
Charitable Giving Investment Example
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FINANCIAL EXAMPLE | Donation
WITH
Flow-Through | Donation
WITHOUT
Flow-Through | |
| Marginal tax rate: | 50% | 50% | |
| Donation to charity: | $25,000 | $25,000 | |
| Net flow-through share and other tax savings: (1) | $12,500 | $0 | |
| Charitable donation tax savings:(2) | $12,500 | $12,500 | |
| Total tax savings:(3) | $25,000 | $12,500 | |
| Less capital gains tax payable: | ($6,250) | $0 | |
| TOTAL COST OF DONATION | $6,250 | $12,5000 | |
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| | - The tax savings are calculated by multiplying the total
estimated income tax deductions for each year on assumed marginal tax
rate of 50%. This illustration assumes that the subscriber has
sufficient income so that the illustrated tax savings are realized in
the year shown.
- Assumes charitable donation amount is equal to the original investment amount.
- Estimate for illustrative purposes only.
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