DONATING SECURITIES – PROPOSED CHANGES FOR 2024
- by Andrew Hawryluk
- July 24, 2023
We are all aware of the of the joy one gets from giving to Charities.
It makes us feel good about having a cause or benefit that means something to us… sometimes it is a deeply rooted cause that pulls at our heartstrings, or we know someone whose life has been impacted by a sickness or tragedy. Thankfully there are charities around to support just about any cause. These charities do amazing work for individuals and communities alike.
Charities benefit from people or companies donating throughout the year or on a regular pre-planned basis. The reality is that many of us wait until the end of the year to make our donations because, although we do want to help, we don’t get around to it regularly. Giving Tuesday is now a global day of giving that happens at the end of each November (typically after Black Friday and Cyber Monday). This day usually sees a surge in donations for those looking to give, but also getting their tax receipts before time runs out for the current year.
So, what are the proposed changes?
Back in 2006 the government introduced rules which encouraged Canadians to donate publicly traded securities to charities. The donation of these securities eliminates the taxable capital gains of the securities in addition to a donation credit for the value of the securities being gifted. A win-win – for the donor as well as the charities. Quite often people have realized the benefit of giving securities while incorporating the gifting as part of their tax planning to a larger extent than simply writing a cheque from their bank account to the charity directly. This type of gifting is changing however starting January 1, 2024.
The changes for 2024 will impact donors earning more than $173,000. The 2023 budget introduced rules that will increase the tax cost of donating qualifying securities to charity. Capital gains on these donated securities will no longer be tax free, but rather 30% of the capital gain will now be taxable. In addition, the donation tax credit that one would normally receive will be cut in half. These rule changes are part of broader changes to ‘alternative minimum tax’ (AMT). The AMT is a tax calculation that is done alongside your regular tax calculation. Under AMT rules you are allowed fewer deductions, exemptions, and credits. If the AMT tax amount is higher than the regular tax, you’ll be liable to pay the AMT tax amount.
Fear not – If you have specific causes or charities that you typically support or have considered donating to (now or in the future), now may be the time to get those donations in place. For larger donations or strategies, Donor Advised Funds (DAF) are charitable investment accounts designed to help facilitate the giving of funds for charitable purposes. If you have broader giving ideas or issues around potential capital gains in the future, please talk to us to see if this is something you should be considering for you and your family.
The upcoming changes around donations of publicly traded securities are set to impact charities significantly. We all want to help ensure the charities doing great work for our communities remain in place and continue to support those around us or needing these benefits.
Be well, stay connected, and remember, there’s more than one way to wealth.
By Andrew Hawryluk
Assante Financial Management Ltd.