Week 12 - Charity

I have to admit, this post is 50% financial and 50% opinion so bear with me.

As Canadians, if we take the time to step back from our daily grind and think about the rest of the world, we realize how good we have it. We have a stable government, no domestic wars, one of the most stable financial systems in the world and a relatively healthy economy. We don't pay for health care (whether you agree with the system or not) and we have a public pension plan. Overall, I think Canada is one of the greatest places in the world to live.

I think for these reasons, we are spoiled for the most part. We make good money as a nation. What we once considered luxuries are now parts of most people's daily living (computers, cell phones, flat-screen TVs, etc.). We spend tens of thousands of dollars on things that will one day be worthless, such as cars, boats, TVs, cell phones and video games.

With all this in mind, in my opinion, we have to start doing more to consider those around us (or far away from us) that are much less fortunate. If you haven't started already, then start thinking about making donations to one or more charities. Maybe your cause is something to do with people, animals or the environment. Either way, there are many excellent organizations that depend on the private sector (you and I) for funding.

The nice thing about charity is that it is totally voluntary and arbitrary. Maybe you grew up playing a sport that you now love. If you love it that much, maybe you should consider giving to an organization that would assist other kids to play your sport that couldn't otherwise afford it. Maybe a hospital or clinic was helpful during a time of need, or maybe you lost someone to a disease. You could contribute to that clinic or to the foundation that raises money for research into a cure for that disease. Maybe you grew up outside camping or hiking with family and you want to see some part of that nature preserved for future generations to enjoy it the same way. All of these are great reasons to contribute.


Tax Benefits
In Canada, our government has set it up so that we receive receipts for charitable donations that we make. According to Canada Revenue Agency, "In 2007, the first $200 you donate is eligible for a federal tax credit of 15% of the donation amount. After the first $200, the federal tax credit increases to 29% of the amount over $200. Generally, you can claim all or part of this amount up to a limit of 75% of your net income. For gifts of certified cultural property or ecologically sensitive land, you may be able to claim up to 100% of your net income."Also, if we have a capital gain on something, we can donate that thing (stock, bond, etc.) to charity and get a receipt for the entire amount, without having to pay the capital gains tax.

Here is an example: You bought 1,000 shares of Suncor at $10/share. Today, they are worth $35/share ($35,000).

Option 1 - sell them and keep the money. You realize a gain of ($35-$10) $25/share, or $25,000 in total. You have to pay tax on that amount (1/2 your normal tax rate), say $10,000. that leaves you with $25,000 in total, or a $15,000 after-tax profit.

Option 2 - donate the shares to a registered Canadian charity. That would yield us $11,122 in tax back, or a profit on our original investment of $1,122. AND our charity would have a $35,000 donation!


Donor Recognition
Many charities have ways of recognizing donors, or you can make a donation as an anonymous individual. It is totally up to you. You might be tempted to keep your donation anonymous, if you aren't the type to boast about money. While that's okay, I think sometimes by showing others how you contributed to a certain organization, it could spur them on to increase their level of contribution. In the end, donor recognition might be better for the charity itself!


Personal or Family Foundations
In Canada, there is also the option of setting up your own foundation (this probably doesn't make sense unless you have more than $50,000 to donate, as it can be costly) and can then direct a fixed % portion of the funds to charities of your choice each year. That way, your foundation will remain long after you are gone and you can leave someone in charge of naming the charities that will receive your donations. The benefit of doing this is that you get the tax back when you contribute to your foundation, without having to allocate all the funds to specific charities right away.


As I mentioned, I think every Canadian should be making some sort of charitable contribution in some way. It might be only a tiny % of your annual salary that comes right off your paycheque but it is still meaningful. If every Canadian even donated $10 per year to various charities, that would be more than $300 million that would be raised! It all helps.

Give it some thought. I am certain that you can find something worthwhile of a few pennies of your hard-earned dollars.