The days are almost over when a charity organization volunteer would come to your door, ask you for a cash donation and give you a hand-written income tax receipt. Not only are most donations now being solicited by mail or online, but the list of non-cash items called “gifts in kind” for which you may receive a tax receipt has expanded greatly beyond donating an old car to the Kidney Foundation or giving unwanted washers and dryers to Habitat For Humanity. You may be able to donate things ranging from stocks in companies to rare stamps and coins to a house you just inherited. As people get older and downsize, they may be sitting on a treasure of unwanted items they could turn into valuable income tax credits.
To be eligible for a tax receipt, donations must be given to registered charities and qualified donees certified by the Canada Revenue Agency, which updates its lists daily as new charities and donees are granted registered status and some old ones change their mandates or fold and are de-registered. In addition to registered charities, qualified donees include registered Canadian amateur athletic associations, registered national arts service organizations, registered housing corporations in Canada set up to provide low-cost housing for the aged, registered Canadian municipalities, provinces, territories and the country itself, plus registered foreign charities and registered foreign universities accepting Canadian students. You can contact CRA by internet or phone to check whether an association can give you an official receipt that qualifies for a Canadian tax credit.
Gifts in kind include non-cash gifts of property. Capital property includes cottages, stocks, bonds, mutual fund units, plus land, building and equipment you use in a business or rental operation that may have gone up or down in value, plus depreciable business or rental property from which you have deducted Capital Cost Allowance over a number of years. You may also be able to donate personal-use property that depreciates in value over time such as furniture, automobiles, boats and a cottage. Also included is listed personal property that increases in value including paintings, sculptures and similar works of art, jewellery, rare manuscripts or books, plus stamps and coins. For example, the Caritas Foundation accepts art and medical equipment, the Edmonton Community Foundation takes publically-traded shares and the Rainbow Society of Alberta receives office supplies and equipment.
There are special rules for determining the amount of an in-kind donation that a tax receipt can be for. Generally an executive member of the charity or donee may assign a Fair Market Value on donations less than $1,000, but donations greater than $1,000 require a professional appraisal, which is paid for the by the donor or recipient. You may have to pay capital gains tax on capital properties you donate that have increased in value since purchase, or claim a capital loss if it’s a depreciable asset and the donation value is less than the remaining adjusted cost base. Some capital property, like shares of companies or mutual fund units listed on designated stock exchanges, can be donated to a charity or donee for the full value at the time of donation without the donor having to pay capital gains tax on the increase since purchase.
If you are an artist and create a work you intended to sell but instead donate it as a gift in kind, it is considered business inventory not capital property, so you claim the value of the work as income for your business and pay appropriate tax, while claiming the same value as a charitable donation and claim the appropriate tax credit. Rules are similar for dealers in the business of buying and selling art, antiques, rare books or other cultural property.
The value of tax credits on charitable donations changed in recent years. An Albertan now gets combined Federal and Provincial tax credits of 25 per cent on the first $200 of their total donations in a year, then a combined 50 per cent on the total donation amount above $200, and 54 per cent on some of the amount above $200 if their taxable income is greater than $200,000.
Ray Turchansky is a tax and personal finance consultant.