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Canadian donors: tax rules a-changing!

Updated: Oct 24, 2023

Update #193


For taxpayers in Canada, changes are coming for 2024, and therefore donating still in 2023 is a good proposition for many.


Tax advantages to donating securities still in 2023


Current tax rules eliminate the taxable capital gain on donations of publicly traded securities, and this tax advantage applies to donations of securities to Estonian Arts Centre, the charity associated with KESKUS International Estonian Centre.


Here’s how: the donor is entitled to receive a donation tax credit for the full market value of the gifted securities and pays no capital gains tax on the amount by which the securities appreciated from their book value. Thus, a donor having securities that have appreciated in value should not sell the securities and donate the sales proceeds. Instead, the donor should do a “donation in kind” – that is, ask their advisor or broker that the shares of the stock or units of mutual funds be transferred directly to EAC, which then issues the tax receipt for the market value.*


Tax benefits are changing as of January 1, 2024


Canada’s Department of Finance proposes decreasing the tax benefits of donating publicly traded shares to charity by making changes to the Alternative Minimum Tax (AMT) regime, whereby specific provisions are used to recalculate taxable income and taxes payable. These provisions may bump up the tax liability from what it otherwise would have been in the past. AMT calculations will change starting January 1, 2024. Fortunately, most Canadians are not subject to the AMT regime. However, those who benefit significantly from preferential tax treatment for cash donations, donations of qualifying securities, capital gains, etc. may be. Donations made in 2023 will be unaffected by the proposed changes.


The rules are seeing the most extensive changes since they were introduced in 1986. One of those new rules for AMT purposes, in broad strokes, is that the donation tax credit will be reduced to 50% of what it would have been, and the capital gain on donated securities will no longer be tax-free. Rather, 30% of the capital gain will be taxable.


How you can manage these changes


How to manage this change in the tax provisions? If you are considering donating publicly listed shares to Estonian Arts Centre, the charity associated with KESKUS, you may wish to make that donation still in 2023. You should of course speak to your financial advisor / independent tax professional in this regard.


The bonus by doing so, is that you are not required to claim the donation tax credit in the year you make the donation. Instead, you may carry it forward for up to five years. This gives you flexibility with regards to claiming your donations despite some of the changes to the tax laws.


KESKUS matching funds campaign in November - stay in touch!


Please sign up for the KESKUS newsletter on the homepage www.estoniancentre.ca to keep apprised of a matching funds capital campaign in November to amplify your giving, whether cash or securities, to help make KESKUS a reality.


* Donors should consult with their financial advisors to determine what's right for their particular circumstance.


 

Get involved and help support our future


Please join our growing list of capital campaign donors to help bring this extraordinary project to completion. Construction is now in Phase II. KESKUS leadership donors are recognized here.


Donations may be made via the capital campaign page. To make a donation of securities or to discuss pledges over time, please call +1.647.250.7136 or email donations@estoniancentre.ca. Donations may be made as a family gift, or in honour of an individual or family. All donations are issued a tax receipt, in Canada via Estonian Arts Centre, US tax receipts via KBFUS and Estonian tax receipts via Eesti Rahvuskultuuri Fond.


Let’s keep in touch

  • Visit the KESKUS website for all the latest news

  • Sign up for the KESKUS monthly email newsletter

  • Follow us on Facebook @EestiKeskus, Twitter @keskus, Instagram @keskus.iec




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