Giving with Purpose: Charitable Donations and Tax Planning
At Prittie Private Wealth, we are always looking for ways to help clients make thoughtful, tax-efficient financial decisions. While taxes are an unavoidable part of our financial lives, there are legitimate planning strategies that may help reduce the amount of tax you owe while also supporting causes that are important to you.
One strategy that is sometimes overlooked is charitable giving.
For individuals, charitable donations generate a non-refundable Charitable Donations Tax Credit (CDTC), rather than a tax deduction. This credit can reduce the amount of income tax you owe. For corporations, charitable donations are generally treated as a deduction that reduces taxable income.
Charitable giving also does not have to be limited to cash. Eligible publicly traded securities, such as stocks, bonds, mutual fund units and ETFs, may also be donated directly. In certain circumstances, donating appreciated securities directly to a qualified done can provide an additional tax benefit because the capital gain on eligible donated securities may qualify for a zero-inclusion rate.
The federal Charitable Donations Tax Credit is tiered, meaning that the credit rate changes depending on the amount donated and, at higher income levels, the donor’s taxable income.
| Donation Amount | Federal Tax Credit | General Treatment |
| First $200 | 14% | Applies to the first $200 of eligible annual donations |
| Amounts over $200 | 29% | Generally, applies to eligible donations above $200 |
| Certain amounts over $200 | 33% | May apply to the eligible portion where taxable income exceeds the top federal tax bracket of $258,482 in 2026 |
Federal credit rates only. Provincial or territorial charitable donation tax credits may also apply.
For 2026, the lowest federal income tax rate is 14%, while the highest federal tax rate of 33% applies to taxable income above $258,482.
Generally, the maximum amount of charitable donations that an individual can claim in a single year is limited to 75% of net income, although there are exceptions in certain circumstances.
One area where charitable giving can become particularly interesting from a planning perspective is the donation of appreciated investments.
When eligible publicly traded securities are donated directly to a qualified donee, you can receive a charitable donation receipt based on the eligible amount of the gift while potentially benefiting from a zero-inclusion rate on the associated capital gain. This can make donating securities more tax-efficient than first selling the investment and then donating the cash, depending on the circumstances.
The timing and selection of investments used for a charitable donation can therefore be important. Charitable giving does not necessarily have to happen at year-end, and planning ahead can provide greater flexibility when determining what to donate and when.
If charitable giving is already part of your plans, there are several situations where a more strategic approach may be worth considering:
Regular giving: If both spouses make charitable donations, it may be advantageous in some circumstances to combine eligible donation receipts and have one spouse claim them. This can reduce the amount of donations subject to the lower credit rate on the first $200.
Bunching donations: Eligible charitable donations that are not claimed in the year they are made can generally be carried forward for up to five years. This can provide flexibility to accumulate donations and claim them in a future year when doing so may be more beneficial.
A higher-income or windfall year: A large bonus, property sale or business transaction may result in a higher-than-usual tax obligation. Combining charitable giving with other tax-planning strategies may help reduce tax payable while directing money toward organizations and causes you value.
Appreciated investments: As noted earlier, donating certain appreciated securities directly can provide both a charitable donation receipt and, where the applicable requirements are met, a zero capital gains inclusion rate on the donated securities.
Estate planning: Charitable gifts can also play a role in estate planning. Under certain circumstances, charitable gifts made in the year of death or through an estate may be claimed against up to 100% of net income. A charitable bequest may therefore help support an organization that matters to you while potentially reducing taxes payable by your estate.
Give now, decide later: A donor-advised fund may provide another option for individuals who want to make a charitable contribution today while recommending grants to specific charities over time. The structure and tax treatment should be reviewed carefully as part of the overall planning process.
Charitable giving can be about much more than receiving a tax credit. When incorporated thoughtfully into a broader financial or estate plan, it can allow you to support organizations that matter to you while also making your giving as tax efficient as possible.
And if there is a cause or organization you are particularly passionate about, that can make the strategy even more meaningful.
Like many Canadians, I support charitable organizations that align with my personal interests and values.
A full list of registered charities and other qualified donees is available through the Canada Revenue Agency. *full list of CRA qualified organizations here*
