Are you a nice person? Do you help those in need? More specifically, do you help those in need by donating to a charity? Well, then this week is a great week for you because we are going to be talking about giving. As Winston Churchill said, “We make a living by what we get, but we make a life by what we give”. Today, we’ll look into some of the financials behind giving away money to charities in need. By helping others, we will be helping ourselves. We’ll also look at how to give in the most effective way possible because when you’re smart about giving, you’re able to give away more and make a greater impact in the lives of others.
The benefits of giving. If you’re already reading this article, then we make the assumption that you are already a giver. Whatever your cause of choice may be, such as helping children, helping the sick, or helping the elderly, we thank you for being a giving person. Aside from us thanking you, however, the government of Canada also thanks you by giving you charitable tax credits. How do they work? Well, it’s somewhat confusing, but let’s take a look at some of the math involved.
As an example, let’s say I donated $400 to my favorite charity, the Terry Fox Foundation, which is a wonderful charity which focuses on cancer research.
On the provincial side, I would receive a credit of ($200 x 5.06%) = $10.12 on the first $200, and then ($200 x 14.70%) = $29.40 on any mount above $200, meaning a subtotal of $39.52 provincial tax credits.
On the federal side, I would receive a credit ($200 x 15%) = $30 and then ($200 x 29%) = $58 for a subtotal of $88 federal tax credits.
Together, I would receive a total of $127.52 tax credits for my donation of $200. In other words, the cost to me of giving a charity $200 is only $72. This is assuming I live in BC, which is one of the WORST provinces when it comes to charitable tax credits. BC has a mere 5.06% whereas Quebec has 20% on the first $200. Makes sense so far? If yes, that’s great. If not, contact us and we can explain this in further detail. This is a short article so we will need to move on.
How can I give more efficiently? The obvious next question here is, how can I (or in this case, you) give money away more efficiently? The example we showed previously allowed you to give $200 at the cost of $70. Can we do better? The answer is. Yes! One fantastic way of giving which a lot of people overlook, or they might be unaware of, is something called legacy gifting. Legacy gifting refers to leaving money behind when a person passes away. This is important because using life insurance, you are able to give a LOT more than just $200 to a charity. Let’s say someone wanted to give $200 every month to a charity, starting at the age of 35. Instead of giving the money directly to a charity, this person could put this money into a special type of life insurance policy with the charity as a beneficiary. By the time they pass away, this insurance policy would be worth $100,000.
Want more? In BC, even though we have such a low charitable tax credit rate, we do have a program called the property tax deferment program. We can use a financial planning strategy to ensure that without costing you a SINGLE extra dime out of your pocket, you can leave behind a tremendous legacy to your beneficiaries, be it to children, other loved ones, or any charities.
Please contact us so we can show you what this plan will look like, and let us help you put together a plan to help you leave a legacy.