Year-end planning conversations: Charitable giving

• Meeting the deadline is only one part of the decision: The more important questions are often when to give, what to give, and how much to give now. Cash, securities, and multi-year giving can each produce different results.
• Charitable tax credits can make a meaningful difference: Depending on your income and province or territory of residence, a gift to a Canadian registered charity may generate significant federal and provincial tax credits.
• The form of the gift can affect the outcome: In most cases, donating securities directly provides greater tax efficiency than selling first and donating cash.
• Planned giving requires more than good intentions: If charitable giving is part of your legacy goals, your will and estate plan need to reflect that clearly.

Timing can matter for both your charitable goals and your tax planning.

For individuals, an eligible donation needs to be made by December 31 to count as a donation made in that calendar year. Unused eligible donation amounts can generally be carried forward for up to five years. For gifts made through a corporation, the relevant deadline is the corporation’s fiscal year-end.

Rather than treating December 31 as the starting point, however, Lazier recommends considering charitable giving earlier — particularly when a significant gift is involved.

“One of the most common missed opportunities is failing to align your donation with the year in which the tax benefit would be most useful,” Lazier says.

For someone expecting an unusually high-income year, a significant capital gain or another major taxable event, for example, it may be worth discussing whether making a larger gift in that year fits their broader plan.

A donor-advised fund can be particularly useful in that situation. “This allows you to receive the tax savings up front and continue to support your preferred charities over time from that donation,” Lazier says. You make the donation now, the funds grow tax-free in an account owned by the charity, and you can recommend grants to other registered charities over time. A donor-advised fund can also help if you want to give before year-end but have not yet decided which charities to support.

When you make a gift to a Canadian registered charity, you may be entitled to federal and provincial donation tax credits. As Lazier notes, those credits can be significant.

At the federal level, donations of up to $200 in a year receive a 14% donation tax credit. Once your total annual donations exceed $200, the federal credit increases 29%, and to 33% to the extent that your taxable income exceeds the top federal threshold. Provincial donation tax credits may increase the total benefit further.

Together, these credits may result in tax savings of up to 55% of the value of your gift, depending on your income and province or territory of residence.

Cash may be the simplest way to make a donation, but it isn't necessarily the only asset worth considering. “When planning a charitable gift, it is important to consider not only how much you give, but also what you give,” Lazier says.

For example, donating certain publicly traded securities that have appreciated in value directly to a Canadian registered charity offers a different tax treatment than selling the securities and donating the cash. The donor may receive a donation receipt based on the fair market value of the securities, while the capital gain arising from qualifying donated securities has a zero inclusion rate. In practical terms, you can avoid tax on the gain while still receiving the charitable credit.

This is also an area where planning ahead matters. For electronically transferred shares, the donation date is generally when the shares are received in the charity's or its broker's account — not simply when the donor initiates the transfer. For gifts started close to year-end, that distinction can mean the difference between claiming the deduction this year or having to wait until next.

Large gifts of securities can also raise additional tax considerations, including potential AMT implications. As Lazier notes, AMT can affect the expected tax result of a significant gift in kind. Only 80% of the donation tax credit is allowed when calculating AMT, and a portion of the capital gain on donated publicly listed securities is also included in income. That is not necessarily a reason to avoid the strategy, but it is a reason to review the expected outcome in advance with your tax and wealth advisors.

Year-end planning can also be an opportunity to think beyond this year's donation. For some families, charitable giving is part of a longer-term legacy — something that extends beyond any single tax year.

And yet the most significant gift many people will ever make is the one in their will, and it often gets the least deliberate attention, precisely because it feels distant. The decision between giving during your lifetime, through your estate, or a combination of both has real consequences. The timing affects your tax position, what your family ultimately inherits, and whether your charitable intentions are actually reflected in your plan. If a gift from your estate is part of that picture, your will needs to say so, and year-end is a natural moment to confirm it does.

“Personalized planning may help you determine whether the tax benefit is better realized during your lifetime, on death, or through a combination of both,” Lazier says. “With this knowledge, you can plan a lifetime of giving and leave a legacy that reflects what matters most to you.”

That makes the year-end conversation about more than meeting a deadline. It's an opportunity to step back and consider whether your giving strategy still reflects your financial circumstances, the causes you care about and the legacy you hope to create.

Your CIBC Private Wealth advisor can work with you and your tax and estate planning professionals to consider how charitable giving fits within your broader wealth plan.

For more information, read Year-end conversations worth having before December 31.