Charitable Giving and Donation Credits

Introduction
Understanding charitable giving and donation credits is essential for individuals, families, corporations, high-income earners, investors, and philanthropists seeking to reduce taxes while supporting meaningful causes. Canada provides some of the most generous charitable tax incentives in the world. Donations of cash, securities, real estate, and other eligible property can significantly reduce personal or corporate tax. However, CRA and Revenu Québec have strict rules, especially after the 2024 AMT reforms, which reduced the tax advantage of certain donation strategies. Whether donating personally, through a corporation, or via advanced strategies involving securities, proper planning ensures maximum tax efficiency and full compliance.

Legal and Regulatory Framework
Charitable giving and donation credits are governed by the Income Tax Act, CRA rules for registered charities, official donation receipt requirements, donation-credit percentage rules, capital-gains elimination rules for securities donations, Québec’s Taxation Act, TP-1 donation schedules, corporate donation limits, AMT legislation, and valuation rules for gifting property. Only gifts to registered charities and qualified donees qualify for donation credits.

What Qualifies as a Charitable Donation
CRA recognizes eligible charitable donations when all three conditions are met:
a voluntary transfer of property
no benefit received in return (unless partial eligible amount rules apply)
the receiving organization is a registered charity or qualified donee
Eligible donations include cash, publicly traded securities, mutual funds, life insurance, cultural property, and some real estate. Donations of services do not qualify; only property can be donated.

Personal Donation Tax Credits
In Canada, individuals receive a two-tier federal credit:
15 percent on the first $200
29 percent or 33 percent on amounts above $200 depending on income
Some provinces offer additional credits. Québec provides its own generous rates, with credits reaching over 48 percent for large donations.

Québec Donation Credits
Québec offers a two-tier system similar to federal, but with generally higher credit rates for larger donations. Québec credits apply to residents who file TP-1 returns and require official receipts. Combined federal and Québec credits often exceed 50 percent of the donation amount.

Donating Publicly Traded Securities
Donating publicly traded securities is one of the most powerful tax strategies because:
capital gains are eliminated
100 percent of the fair market value qualifies for the donation credit
income tax is reduced significantly
This strategy is ideal for investors with large unrealized gains, high-income earners, or those planning philanthropic giving.

Donation of Mutual Funds and ETFs
Mutual funds and ETFs qualify for the same capital-gains elimination rules as publicly traded shares. The donation receipt is based on fair market value on the donation date.

Donating Cryptocurrency
Crypto donations are treated like donations of capital property. Capital gains are normally taxable unless the crypto qualifies as publicly traded property under CRA rules. Most crypto does not qualify for capital-gains elimination, but donors may still claim donation credits based on fair market value. Detailed valuations and documentation are required.

Donating Real Estate
Real estate can be donated, but valuation, appraisal, and legal requirements are strict. Capital-gains tax may apply unless the gift qualifies as cultural property or ecological land donations. Large real estate donations often require advance CRA approval and legal planning.

Charitable Donations Through a Corporation
Corporations receive a deduction instead of a credit. Corporate donations:
reduce taxable corporate income
cannot exceed 75 percent of net income in most cases
can eliminate tax for holding companies with passive income
Corporations may also use charitable donations to reduce high passive-income tax rates.

Flow-Through Share Donation Strategy
Historically one of Canada’s most powerful charitable strategies, this involves purchasing flow-through shares, renouncing deductions, then donating the shares to charity. This produces donation credits and large deductions. However, due to new AMT rules, this strategy is now heavily restricted. Professionals must model AMT impact before using flow-through charitable structures.

Donation Carryforward Rules
Individuals may carry forward unused donation credits for up to five years. Corporations may also carry forward donations, subject to income limits. Strategic carryforward use allows donors to optimize credits across multiple years.

Eligible Amount Rules
If a donor receives a benefit (for example, event tickets), the eligible amount equals the fair market value of the gift minus the value of the benefit received. CRA audits these benefits closely.

Official Donation Receipts
Only official receipts from registered charities are accepted. CRA requires:
charity name
registration number
gift date
eligible amount
fair market value
Failure to obtain proper receipts may cause CRA to deny credits.

Charitable Donations and AMT (2024 Reform)
Under new AMT rules, only 80 percent of donation credits may apply during AMT calculations. This significantly impacts:
large donations
donations of securities
flow-through share donations
donation timing in high-income years
Even though regular tax benefits remain strong, high-income donors may face AMT in the year of donation if not planned properly.

Charitable Giving Planning for High-Net-Worth Individuals
High-income individuals often benefit from:
donating securities instead of cash
donating in years with high taxable income
using family foundations or donor-advised funds
planning around AMT exposure
coordinating donations with business sale years

Charitable Bequests and Estate Donations
Donations in a will are powerful estate-planning tools. Estate donations:
have flexible allocation between the estate and final return
may offset capital gains on death
can reduce estate tax burden
Estate donations are essential for high-net-worth clients with significant unrealized gains.

Donor-Advised Funds (DAFs)
DAFs allow donors to receive immediate donation receipts while distributing funds to charities over time. They are popular for clients wanting philanthropic flexibility, anonymity, or long-term structured giving.

Common Mistakes in Charitable Donation Tax Planning
donating without considering AMT
not keeping official receipts
donating services instead of property
not maximizing securities donations
forgetting donation carryforwards
incorrect valuation of property donations
CRA rejects improperly documented donations.

Key Court and CRA Positions
CRA and courts consistently enforce strict donation documentation. Courts have ruled against taxpayers claiming inflated donation values or participating in abusive charity-shelter programs. CRA audits donation receipts carefully, especially for gifts-in-kind and cultural property. Courts uphold CRA’s position that donation credits cannot exceed eligible amounts.

Why CRA and Revenu Québec Audit Donation Claims
large donation amounts
non-cash gifts
gifts of securities
flow-through share donations
inconsistent donation history
donations to high-risk charities
CRA and ARQ target these areas due to past abuse.

Mackisen Strategy
Mackisen CPA helps individuals, corporations, investors, and families structure charitable giving and donation credits for maximum tax efficiency. We model donation timing, evaluate AMT exposure, optimize securities donations, prepare corporate donation strategies, coordinate estate donation planning, assist with DAF setups, and defend donation claims in CRA or ARQ audits.

Real Client Experience
A Montréal investor saved over 50 percent in taxes by donating appreciated securities. A business owner used corporate donations to reduce passive-income tax. A high-income donor triggered AMT from a large end-of-year donation; Mackisen restructured donations across multiple years. An estate donation eliminated tax on a significant capital gain at death with our planning.

Common Questions
Are donations tax-deductible? Yes — credits reduce personal tax.
Can I donate securities tax-free? Yes — capital gains are eliminated.
Do corporations get credits? No — they receive deductions.
Does AMT affect donations? Yes — only 80 percent credit eligible.
Can I donate crypto? Yes, but capital gains often apply.
Can I carry forward donations? Yes — up to five years.

Why Mackisen
With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps Canadians maximize charitable giving and donation credits while ensuring full CRA and Revenu Québec compliance. Our expert planning ensures generosity is paired with optimal tax savings and audit-proof documentation.