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The holiday season is a time of year when many of us turn our minds to charitable giving. For some, it is motivated by altruism and holiday spirit; for others, it is motivated by the cold hand of tax planning and the realization that we’ve being living the past 11 months like Ebenezer Scrooge.
Whatever your reason, here are a few ways to give more with less:
- Be tax savvy - The more money you have, the more you can give. By understanding the tax implications of charitable gifts, you can give more with less. The most basic rule in Canada is that you only get a credit equal to the lowest marginal tax rate for gifts up to $200; once your total gifts exceed $200, your credit increases to the highest marginal tax rate, a fairly significant jump. Your gifts get much more tax efficient once you pass this threshold. You should allocate all your donations to one spouse to maximize your donation tax credits, and you can also carry forward donations to ensure greater amounts are entitled to the higher rate.
- Get Receipts - Related to the first point, it is important to get proper documentation for the gifts you give. A $25 donation with no receipt costs you $25; a $25 donation with a receipt only costs you about $15. CRA generally won’t accept cancelled cheques or your good word, so get a proper receipt when you give.
- Give Stuff- Your gift doesn’t have to be in the form of cash. There are many charities that will gladly accept in kind donations of everything from food items to office supplies to clothes and blankets. Also keep in mind that even your junk may have value- a number of charities will take abandoned cars and recyclable metals off your hands.
- Give Securities - Another option for charitable giving is to donate shares from your investment portfolio. In addition to getting the full charitable donation tax credit, you also get to avoid capital gains on those shares.
- Give your Time - Charities aren’t run by robots (although that would be pretty cool…)- they need people to keep things running. Find a charity you like and consider volunteering your time and skills. You can also turn this into a family activity to help teach your kids the importance of being involved in their community.
- Give the Gift of Giving- It’s always a controversial gift move, but consider making a donation to a charity in lieu of a gift to friends or family. One of my favourite ways to do this is through the World Vision Gift Catalogue, which allows you to select a specific item to purchase with your donation, such as a mosquito net, a chicken, or even solar panels for schools. Just don’t try to pull off the George Costanza gift to “The Human Fund”.
- Charge Admission- If you’re hosting a holiday party, consider asking guest to bring along an item for the local food bank or some other things required by local charities. We’ve done this a few times for dinner parties by asking guests to bring along an item needed by the SPCA instead of a host gift. Nobody is obliged to do so, but many people will. I’ve been told that this is “horribly tacky”, but the SPCA disagrees, and I tend to value the opinions of needy puppies over those of Miss Manners and her socialite posse.
- Buy What Charities are Selling- Many charities host holiday sales or sell items as fundraisers. By buying from these sources, you’re checking someone else off your gift list and helping a good cause at the same time. If you’re particularly challenged when it comes to gift wrapping (as I am), there are a few charities who offer gift wrapping services in exchange for donations. It’s well worth the money!
- Know Where Your Money Goes - Not all charities are created equal, and it’s important to know that the money you’re donating is going where it is needed most. Find out what percentage of your donation will go to the stated cause, and what percentage goes to overhead and administration. Financial information for registered Canadian charities can be found on the CRA Charities and Giving site. Use this information to make an informed decision about where your money will best be used.
- Plan Ahead for Next Year - Finally, it’s easy to want to give generously this time of year, but charities need funding and support year round. While you’re paying attention to social causes, take the opportunity to developing a year round giving plan using strategies such as automatic donations and monthly allocations, rather than scrambling to make it onto Santa’s Nice List as the year comes to an end.
I’d love to hear any other tips that my Dear Readers have about giving during the holiday season.
* The original title for this post was “Give Like Santa, Save Like Scrooge”, but was changed to avoid another unpleasant encounter with the Canadian Tire legal goons.
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{ 4 comments… read them below or add one }
Hi MGL,
Some other suggestions are:
- use your Airmiles or Aeroplan (or whatever credit card that gives you something back) to make your charitable donations, so besides a donations receipt you get a few points (or whatever) back! Many charities will allow you to make monthly payments by credit card, making it easier to do so financially and administratively (for both you and the charity).
- Payroll deductions are wonderful also. My wife and I make payroll deductions for United Way and don’t miss the buy-weakly, I mean, bi-weekly, deductions. Payroll deductions work well for forced savings under the method of investing. This assumes that your employee offers this of course!
Finally, while it is the festive season and all that (except in Ottawa, currently gripped by a transit strike - nothing festive here, just ask any driver stuck in gridlock) remember that charities need your help all year round. One of my previous bosses organizes an event at one of the local soup kitchens. He solicits $$ contributions and volunteers to prepare a meal in January or February when the donations are normally at low levels. We have a good time preparing the food and serving (although it is very heartbreaking to see the number of children now using the service).
I don’t have any additional tips- but I did put down a charitable gift on my Christmas wish list. Either a couple of chickens or a goat for a family who needs them. I WANT chickens and a goat, but there are people who need them more than I do.
Another nice thing about those gift catalogues (World Vision, Unicef or Oxfam) is that you can choose a gift that relates to whoever’s getting the gift- my grandfather’s a retired teacher, and he loved having a donation made in his name for school books for a classroom.
Free the Children is another great charity, with a very small percentage going to administration, so you can buy more goats for your buck
@Jonathan - Excellent tips, especially about ensuring that you donate year round. With respect to using a points card, do you (or anyone else, for that matter) know if charities may the same merchant fees for credit card purchases / donations as other merchants. From what I can recall, it can be 1-3% that goes to Visa/MC. Do charities get an exemption from this?
@Allison - Good point about matching the donation to the recipient. We made a donation of a post-natal care kit throuhg World Vision as a gift for friend recently for her baby shower- it’s the same idea. I wonder if anyone can donate a free divorce to a needy family on my behalf?
@Nola - Another great option. Although I must admit that I had never expected to see the phrase “more goats for your buck” on my blog. I’ll have to see if that turns up as a popular search phrase!