A guide to year-end giving
Follow your heart and save money on income tax by contributing to charity this holiday season.
If you’re like many Canadians, your mailbox and your inbox are jammed in the holiday season with greeting cards, mail-order catalogues, promotional calendars, sale flyers – and requests for charitable donations. While you probably enjoy catching up with faraway friends and relatives and maybe even flipping through gift guides, you might not appreciate the flood of requests for money.
But many people do respond to year-end appeals – that’s why so many charities make them. According to Thirty Years of Giving In Canada, a 2018 report from the Rideau Hall Foundation and Imagine Canada, individual Canadians gave an estimated $14.3 billion to charities and non-profits in 2014. And many charities report that the biggest chunk of their donations comes in at year-end.
“Year-end letters, emails and social media posts are important requests,” says Carol Reist, executive director of The Dam in Mississauga, Ont. “Many people choose to give in December and it is these donors who make it possible for youth to get help and support year round. Roughly one-third of our annual donations from individuals come in during December alone.”
Giving to a charity you’ve supported in the past is an easy decision. You just need to check that you can afford it again this year. But if you’ve never donated before and you’re feeling a bit overwhelmed by the number of requests you’re receiving, asking these questions can help you decide where to give:
What’s your passion? Are you an avid environmentalist? An animal-lover? Are you concerned about the plight of women or children in developing nations? Is there a particular disease you want to see vanquished? Choose a charity that speaks to something close to your heart, and your giving will be a joy and not an obligation.
Is it a registered charity? Only charities registered in Canada can issue Canadian income tax receipts for cash donations. Registered charities are also subject to Canada Revenue Agency (CRA) regulation over how they raise and spend their money and how they are structured. Typically, a charity will include its charitable registration number on all correspondence and in a prominent place on its website. To check that a registration is still valid, search the name on the CRA’s Charities Listings.
How much of your money goes to overhead? The CRA requires that a registered charity spend the majority of its revenues on its actual charitable purpose, not on administration and fund-raising, and submit these figures annually. Many charities include this information on their websites; you can also find it using the Quick view function of the CRA’s search tool. According to the CRA’s Fundraising by Registered Charities policy, overhead of 35% or less in a given year isn’t usually a concern. A percentage between 35% and 70% will prompt a review and, at over 70%, the CRA will demand a satisfactory explanation.
That said, a charity that spends next-to-nothing on administration isn’t necessarily the best one to support. Large, well-run organizations depend on the skills of communicators, development officers, information technology experts and other paid professionals. On the other hand, some smaller but equally effective groups rely heavily on volunteers. It’s useful to compare charities of a similar size and scope.
Once you’ve decided where to give, it’s time to look at the process:
How does the tax credit work? To encourage Canadians to support charities, the federal and provincial governments reduce the income tax you pay in proportion to the donations you make, through a tax credit. (See Claiming charitable tax credits for more guidance.) Traditionally, charities mailed paper tax receipts early in the year, just ahead of income tax time. Some still follow that model; others send electronic receipts when you make an online donation, or issue a paper receipt on the spot for an in-person donation. (If you’re expecting a receipt by email, make sure it hasn’t been diverted to your spam/junk folder.) It’s a good idea to keep an email folder for your e-receipts, backed up with a paper folder of printouts and paper receipts. Get in the habit of filing all receipts as they come in, so they won’t get lost in your inbox or on your desk.
Here’s something else to note: If you buy something at a charity fundraiser, you don’t usually get a tax receipt for it, because you received something in return for your money.
How much tax will I save? That depends on which province you live in, but it could be a significant amount. Use the CRA’s Charitable donation tax credit estimator to get a ballpark figure.
Teaching your children about giving
Calgarian Jen Taylor, who writes The Mocha Blog, is a creative giver. "Our holiday giving doesn't follow any given formula; in fact, we often change year to year,” she says. “There have been years we split the money we had decided to spend on our own gifts and donated half instead. There have been years when we focused on creating a plan for giving through a workplace in order to create momentum in a group.” Taylor gets her children involved in her family’s charitable giving. “This time of year is very much about shopping and buying gifts,” she says. “I'm very pleased to remind my kids of the good they can do, and to show them how very fortunate they are during the holiday season. I like the idea of them gaining awareness of what goes on in the rest of the world, and the needs of people in communities they may never have imagined.”
She finds catalogues from charities such as Plan Canada and World Wildlife Fund especially helpful. “I think they are a good visual reminder of how great the needs are, in our own communities and across the globe, as well as a stark look at how easily we can help. ‘$25 can do this? $100 can do all that?’"
By Anne Levy-Ward