Co-authored by Peter Sproule, CFP, CLU, CHS & Ahmed El-Halaby, Philanthropy Officer

 

While the word ‘philanthropy’ may make you think of $100 million pledges to hospitals and universities befitting the benefactor’s name on the side of a building, philanthropy comes in all shapes and sizes. At Momentum Financial Services Inc., we often discuss the benefits of charitable giving with clients, not only from a philanthropic perspective but also for the financial advantages it can offer.  For most, the topic of giving starts with values and what causes or organizations are close to their heart.

Ahmed El-Halaby, a Philanthropy Officer with the United Way Halton & Hamilton, remembers seeing his father’s impact on his community in his native Egypt, and after moving to Canada, decided that helping others by working with donors was his way of both doing something he loves and honouring his father’s legacy.

“Life can feel unfair, but my father saw it as an opportunity to show kindness. Raised in poverty, he built a successful medical career and was always committed to giving back to his community despite the guilt of leaving it behind for a better life. His sense of responsibility, which I carry today, drives my work at United Way Halton & Hamilton—an organization that supported my family as newcomers. It fills me with great purpose.” explained El-Halaby.

“What drives me are the stories of the thousands of lives changed by United Way Halton & Hamilton. They are our neighbours, who have experienced first-hand the tremendous impact that a network of support can provide.”

This one is Katie’s:

Katie’s story is one of resilience in the face of abuse, addiction, and homelessness. As a child, she endured physical and sexual abuse, and by her teenage years, she was trapped in a cycle of trauma and substance abuse. Experiencing homelessness, she panhandled and often slept in unsafe places, feeling like a burden to friends and struggling with feelings of shame. Despite these hardships, Katie never lost hope.

Through a network of United Way-supported programs, she found a safe space where she was welcomed and supported. These programs provided her with meals, skills workshops, and the opportunity to connect with others facing similar struggles, which was key to her recovery. Katie worked hard to regain control of her life, going back to school and healing both mentally and physically.

Now a peer support worker, Katie uses her experiences to help others who are going through similar challenges. She is no longer defined by her past but by her strength, resilience, and the support she received. United Way gave her the chance to rebuild her life and contribute meaningfully to society, and she is deeply grateful for the opportunities it provided.

According to a 2023 study conducted by the Fraser Institute, the number of Canadians donating to charitable organizations has dropped by almost 8% over the last 20 years. With many households strained and government and community services strained, Canada’s charitable sector needs more help than ever.

So why do many Canadians shy away from giving? We think it has more to do with not understanding what is possible, and how to do it. In this article, we’ll explore different ways of charitable giving in Canada, the tax benefits associated with it, and the unique opportunities presented by donor-advised funds.

Understanding Charitable Giving in Canada

Charitable giving can take many forms, and Canadians are increasingly finding creative ways to support their favorite causes. Here are some common methods of giving:

  1. Direct Donations
    • The most straightforward method, where individuals give money directly to a registered charity. These donations can be one-time or recurring, allowing for flexibility in how much and how often you contribute.
  2. Gift of Securities
    • Donating publicly traded securities, such as stocks, is a popular option. When you donate securities directly to a charity, you can avoid capital gains tax, making this a tax-efficient way to give. Most larger charities now have processes in place to make gifting securities convenient.
  3. Bequests
    • A bequest is a gift made through a will, allowing you to leave a portion of your estate to a charity upon your passing. This can be a meaningful way to continue your philanthropic legacy.
  4. Planned Giving
    • This encompasses various strategies, including setting up a trust or making life insurance policies payable to a charity. A planned gift continues to make an impact beyond your lifetime, ensuring that your generosity benefits future generations.
  5. Donor-Advised Funds (DAFs)
    • DAFs are an increasingly popular way for individuals to manage their charitable giving. These funds allow donors to make a charitable contribution, receive an immediate tax deduction, and then recommend grants to their chosen charities over time.
  6. In-Kind Donations
    • Instead of making a cash donation, donors have the option to contribute goods or services. To explore this option further, feel free to reach out to Ahmed El-Halaby or United Way Halton & Hamilton for more information.

 

Tax Benefits of Charitable Giving

One of the most compelling reasons for Canadians to engage in philanthropy is the potential for tax savings. Here are some key tax benefits associated with charitable giving:

  • Tax Credits: In Canada, individuals receive a non-refundable tax credit for donations made to registered charities. The federal credit is 15% on the first $200 and 29% on amounts over that. Provinces offer additional credits, making the total benefit significant.
  • Elimination of Capital Gains Tax: When donating publicly traded securities, you can eliminate the capital gains tax that would otherwise apply if you sold the securities first and then donated the cash. This means you can give more while paying less in taxes.
  • Increased Tax Deductions for High-Income Earners: For high-income earners, the combined federal and provincial tax credits can be substantial, especially when they maximize their charitable contributions.
  • Carry-Forward Options: If your charitable contributions exceed the allowable limit for claiming tax credits in a given year, you can carry forward the unused portion for up to five years.

The Role of Donor-Advised Funds

Donor-advised funds (DAF) represent a flexible and strategic option for charitable giving. If you want more of a hand in distributing funds and want to see more ongoing support, DAFs may be a great option. Here’s how they work:

  • Establishment and Contribution: You set up a DAF with a sponsoring organization (such as a community foundation) and make a contribution, which is then placed in an investment account.
  • Immediate Tax Benefits: You receive a tax deduction for your contribution at the time you fund the DAF, even though the actual distribution to charities can happen later.
  • Control and Flexibility: As a donor, you can recommend which charities receive grants and how much they receive, allowing you to adapt your giving strategy over time.
  • Investment Growth: The funds in a DAF can be invested, potentially growing over time before being distributed to charities. This allows your contributions to have an even greater impact.

 

Philanthropy in Canada is not just about giving back; it’s also a powerful tool for strategic financial planning. By supporting organizations like United Way Halton & Hamilton, Canadians can make a significant impact in their community, set up future generations for success, and benefit from considerable tax advantages. Whether you choose to donate directly, consider a bequest, or set up a donor-advised fund, the power of philanthropy can transform communities and create a lasting legacy.

If you’re considering ways to include philanthropy in your financial plan, Momentum Financial would be happy to discuss options that align with your goals. Contact us today to start the conversation.

 

Ahmed El-Halaby is a philanthropy officer with United Way Halton & Hamilton. He began my career in the medical field, and always felt a deep calling to philanthropy. After five years of experience in healthcare, Ahmed moved to Canada in March 2023, and he’s honored to now help UWHH carry out its vital mission. Philanthropy is both a passion and a responsibility, and nothing lights him up more than an act of kindness. “The best way to find yourself is to lose yourself in the service of others.” – Mahatma Gandhi.”

 

Aligned Capital Partners Inc. (“ACPI”) is a full-service investment dealer and a member of the Canadian Investor Protection Fund (“CIPF”) and Canadian Investment Regulatory Organization (“CIRO”).  Investment services are provided through ACPI or Momentum Wealth, an approved trade name of ACPI.  Only investment-related products and services are offered through ACPI/Momentum Wealth and covered by the CIPF. Financial planning, tax planning, and insurance services are provided through Momentum Financial Services Inc..  Momentum Financial Services Inc. is an independent company separate and distinct from ACPI/Momentum Wealth.