Get rewarded for your generosity this holiday season with 2010 tax credits

TORONTO, Dec. 8 /CNW/ - While it may be the season for giving, Canadians who are looking to contribute to charity before the new year can look forward to getting a little back on their 2010 tax return.

"If you feel like making a difference this season or are stumped as to what to give that person on your list who already has everything, consider making a charitable donation by December 31, 2010," says Jamie Golombek, Managing Director, CIBC Tax and Estate Planning. "Not only will your gift go towards a worthy cause of your choice, you'll be rewarded for your goodwill with credits towards your 2010 tax-filing."

And with more than 85,000 registered charities in Canada to lend your support to, many of which offer the convenience of online donations and automatically generated tax receipts sent straight to your e-mail inbox, giving is easier than it has ever been. Mr. Golombek offers the following guide to help Canadians give strategically this December as it's possible to be both philanthropic and tax-efficient.

The tax value of a donation - Canadians who donate to registered charities before December 31 are eligible to claim tax credits for the year equal to a maximum of 75 per cent of total net income for 2010. A non-refundable federal tax credit of 15 per cent for 2010 is granted for the first $200 of donations claimed, while all donations beyond the first $200 will be eligible for a 29 per cent credit. Additional provincial credits boost the savings even higher.

Gifting appreciated securities - Donating publicly-traded securities, mutual funds or segregated funds with accrued capital gains to a registered charity not only entitles you to a tax receipt for the fair market value of the security or fund being donated but eliminates any capital gains tax as well.

Sharing donations between spouses - A donation receipt in the name of one spouse or partner can be used by either partner, allowing spouses to pool their donations together to take advantage of the higher threshold credit rate and possibly provide surtax savings, depending on your province.

Timing your claim for maximum efficiency - Note that unused donations made in 2010 but not claimed in 2010 can be carried forward for up to five years and used against tax owing in those years as well.

Establish a donor-advised fund - Donor advised funds (DAFs) essentially piggyback on public foundations, such as community foundations, by permitting you to create a "mini-foundation" as a subset of the larger, public foundation. Just because you get the tax benefit today, however, doesn't mean that the entire amount you donate has to immediately go to a registered charity. The funds can grow inside the DAF tax-free and each year you can recommend distributions to be made annually from your DAF to registered charities of your choice. The funds inside your DAF are pooled together with all other donors' funds and are invested by professional money managers. Perhaps the biggest advantage, however, is that as a donor, unlike setting up your own private foundation, you don't have to worry about any administrative details or record keeping, as this is all done by the DAF.

And finally, discuss incorporating giving into your overall financial plan with your advisor. "It's important to devise a tax-efficient giving strategy that helps you support the causes that matter to you while reducing taxes where possible," says Mr. Golombek.

To confirm the registration status of a charity, visit the Canada Revenue Agency website which offers a searchable list of Canadian charities.

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