It’s not surprising when you realize the many benefits of giving. Scientific studies discovered that the act of giving increases certain hormones, including serotonin, dopamine and oxytocin, which can all make you feel good. It can also reduce cortisol, the hormone in your body that can lead to stress.
People who regularly give to charities tend to be less tired and less depressed, as well as being in an overall healthier state than those who don’t donate. There are also considerable tax benefits when you donate to charities in Canada.
However, with well over 80,000 registered charities in Canada, it’s not surprising that many people wonder how to decide which charity to donate to. We take a look at some of the financial advantages of charitable giving and key questions to ask to make that decision easier.
The advantages of charitable giving
There are considerable incentives for Canadians to give charities. The federal government provides a credit of 15% for the first $200 of annual charitable donations, which jumps to 29% for donations above $200 (or 33% for the very top earners).
Most provincial governments also provide a tax credit, making most combined federal and provincial tax credits worth around 40% or more for donations above $200. Couples can combine their tax donations to increase their tax credit, and you can also carry donations forward to subsequent years to maximize the tax advantages.
There can also be significant advantages to donating certain investments (such as publicly traded shares, mutual funds and exchange-traded funds). By donating them to a charity, you can avoid paying capital gains tax, plus you’ll receive a tax receipt for their full market value.
It’s important, however, to make sure you donate to registered organizations that can issue tax receipts in Canada. You can find them on this government list of charities and other qualified organizations.
Questions to ask when deciding which charity to donate to
As we’ve seen, there are thousands of charities in Canada; asking yourself these questions can help you to quickly decide which charities are a good fit for you.
Which charities are close to your heart?
Does a charity resonate with you? Do you feel a personal bond with the work they do?
For example, you or a loved one may have received life-saving treatment, so you may want to support related charities (such as the Canadian Cancer Society). If you love animals, you could support an animal welfare charity, humane society or wildlife/conservation organization. If you love the arts, you’re bound to find a charity that supports your specific interest, such as opera, ballet or helping underprivileged kids learn how to play music.
Charities are typically broken down into these categories:
- Social services (including homelessness, poverty, etc.)
- Environmental issues
- Indigenous Peoples
- Animals
- Culture/the arts
- Health
- International aid
- Education
Research any categories that resonate with you (CanadaHelps has a large database of Canada’s charities, which you can search by category) and you’ll soon find charities that could be a good fit.
What kind of impact do you hope to achieve with your charity dollars?
Do you want to have a local or global impact? For example, you may want to support a local humane society versus the World Wildlife Fund, or Harvest Manitoba versus Action Against Hunger.
Do you want your donations to make an immediate or long-lasting difference? For example, organizations that provide aid to areas experiencing disasters or war versus charities that work on more long-term projects, such as the transition to clean energy or improving air and water quality.
How successful is a charity in reaching its goals?
Rather than worrying about how much a charity spends on indirect costs (such as fundraising and admin), it’s better to focus on how big of an impact it’s making towards its ultimate goal (for example, how many animals were rescued, how many people saw their shows or the number of people they fed).
Charities need to spend money and employ staff to have the greatest impact, so researching their annual report is a great way to discover how effective they are. These reports typically detail results like the number of people impacted by its work, the amount of money spent on life-saving research and any major breakthroughs.
How financially responsible is the charity and its leadership?
A charity’s financial statement provides details of its income and expenses. You can see how much they spend on their programs compared to their admin and fundraising. Details typically include revenue from donations and grants, and expenditure (including programs, research, fundraising, administration, etc.).
If a charity doesn’t publish financial statements, you can research its accounts by looking at its T3010 (a tax form that all Canadian charities must submit). Search for the charity’s name at the Government of Canada’s charity listings page and click on the year you’re interested in to see up to five years of T3010 financial information.
As well as fiscal responsibility, you’ll also want to look for charities with strong leadership. Leaders should have experience working for not-for-profits and the knowledge necessary to maximize the charity’s efficiency in reaching its goals. Most charities list their leaders on their website, along with their biographies/resumés.
What’s the most efficient way to donate to charities?
Creating a giving plan and integrating it into your overall financial plan is a crucial part of efficient charitable giving. Your IG Advisor can help you to set one up, including strategies to maximize your donations’ value to your chosen charities and using your donations in the most tax-efficient way for you.
You could also consider giving via a donor-advised fund (such as the IG Charitable Giving Program), which provides many benefits, including:
- The advantages of a private charitable foundation but with far less time commitment and administration headaches.
- The flexibility to donate cash and investments.
- Tax-free donation growth within the fund.
- Much lower costs than setting up a private charitable foundation.
- You have full control over the investment strategy for your donations and can be as involved in the charitable giving process as you like.
- You can name successors to the account, to pass the fund on to your children and have a long-lasting legacy.
Talk to your IG Advisor about integrating a giving plan into your financial plan and whether the IG Charitable Giving Program might be a good fit for you. If you don’t have an IG Advisor, you can find one here.
Written and published by IG Wealth Management as a general source of information only. Not intended as a solicitation to buy or sell specific investments, or to provide tax, legal or investment advice. Seek advice on your specific circumstances from an IG Wealth Management Advisor..
The IG Wealth Management Charitable Giving Program is offered together with the Strategic Charitable Giving Foundation, which operates independently from IG Wealth Management. Donations are irrevocable and vest with the Foundation. This information is general in nature and not intended to be professional tax advice. Please read the Program Guide for complete details, including fees and expenses.
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