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For many Canadians, charitable giving is triggered by an emotional event, a community need or a mere request. But Canada’s tax system also offers some of the world’s most generous incentives, allowing donors to significantly reduce their tax bills, experts say.
Here are key tax considerations to align your charitable giving with smarter financial planning.
Claim your donation tax credits
Many Canadians overlook the tax benefits tied to charitable donations, and as a result, about $2-billion in donation tax receipts aren’t claimed, according to Malcolm Burrows, head of philanthropic advisory services at Scotia Wealth Management in Toronto. So his first recommendation is simple: Make sure you’re aware of these tax credits.
“You don’t make money by giving it away,” he said. “It’s not unusual for Canadians to get 40 or 50 per cent back regularly from every dollar they donate.”
Depending on income and the size of the donation, the tax credit can be significant.
“If you’re giving under $200 it might be as low as 14.5 per cent that you’re getting back,” said Mr. Burrows. “But if you’re at higher income, with a net income of more than $253,414 in 2025, and giving more than $200, it can be up to 54 cents on every dollar you donate, pending the province.”
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Every little bit helps
Dana Hicks, certified financial planner and executor adviser at Edward Jones based in Delhi, Ont., says the average Canadian stands to benefit from making donations, too. “The $200 threshold is where it becomes really important for tax minimization,” she said. But even smaller gifts throughout the year can add up to reduce taxes, “especially in the higher income-earning years where you can benefit from a tax break.”
She also notes that unused donation tax receipts can be carried forward for up to five years, allowing the average donor to benefit from tax savings.
Giving regularly helps both donors and charities. Mr. Burrows adds that setting up monthly pre-authorized donations to registered charities not only makes giving easier, but it also streamlines tax reporting with a single tax receipt at the end of the year.
Many charities operate on “feast or famine” cycle, with the majority of donations arriving in the final six weeks of the year, according to Mr. Burrows. “Spreading out donations is very helpful to charities, as well as for your personal planning,” he said.
Donate securities in-kind
There is an incentive to donate in-kind assets such as publicly listed stocks, mutual funds or exchange-traded funds that have increased in value.
Mr. Burrows calls this the most tax-effective way to make a simple donation in Canada because the advantages are two-fold: Donors receive a charitable tax receipt for the fair market value of the securities, and they are exempt from paying capital gains tax on the appreciation.
Avoiding the capital gains tax can dramatically reduce your tax bill. In some cases, Mr. Burrows notes this can mean up to 25 per cent more tax savings for every dollar donated if the stock has appreciated significantly.
You can also leverage depreciated securities through tax-loss selling. “This can be useful when markets are down, and a person is sitting on losses that can’t be fully used in one year,” said Ms. Hicks. You can claim the donation credit at fair market value and use the loss to offset gains in current or future years.
Such tax policies are intentional, according to Mr. Burrows, because the government wants to see charitable giving funded by Canadians’ savings and investments rather than from their out-of-pocket income. Encouraging people to be more proactive in their tax planning “means that they can give more because they save more,” he said.
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Consider DAFs
Donor-advised funds are accounts managed by a sponsoring organization that provides donors with an immediate tax receipt at fair market value. Capital gains are avoided, and gifts to charities can be spread out over several years.
DAFs can be particularly beneficial if your income is higher than usual due to a one-time liquidity event. “I think we’re seeing more of this because of the shift in intergenerational wealth,” said Ms. Hicks.
Name a charity in your will
“Canadians are particularly rich at the time of death,” said Mr. Burrows, who is also the executive director of the Aqueduct Foundation, which facilitates personal philanthropy. As Canadians live longer and accumulate wealth, many are already financially secure by the time they receive inheritances, according to Mr. Burrows. Because of this, he’s seeing more clients choosing to include charities in their estate plans or creating a charitable legacy in the name of their parents. The average donation through the foundation was more than $350,000 last year.
In some cases, charitable gifts can offset taxes owed by an estate. “Some families would be no worse off by giving it to charity than they would be by just holding their nose and paying taxes,” he said.
When donors realize that dynamic, it can change their perspective. “They really are just getting the taxes back. And for a lot of families, that’s a bit of a eureka moment.”
