See how much you save by donating appreciated stocks in-kind vs. selling and donating cash. The 0% capital gains inclusion rate makes in-kind donations one of the most powerful tax strategies in Canada.
When you donate publicly traded securities directly to a registered charity, the capital gains inclusion rate drops to 0%. This is one of the most generous tax incentives in the Income Tax Act — you completely avoid the capital gains tax while receiving a full donation tax credit based on the FMV.
The best candidates for donation are securities with large unrealized gains that you'd otherwise sell. The larger the gain relative to your ACB, the bigger the tax advantage. A stock purchased at $10 now worth $100 saves far more in avoided capital gains than a stock purchased at $90 now worth $100.
To execute: contact your broker and request an in-kind transfer to the charity's brokerage account. The charity will issue a tax receipt for the FMV on the transfer date. Do NOT sell the securities first — that defeats the entire purpose and triggers capital gains tax.
When you donate publicly traded securities directly to a registered Canadian charity, the capital gains inclusion rate is reduced to 0%. You pay no tax on the appreciation AND receive a donation tax credit based on the full fair market value. If you sell first and donate cash, you pay capital gains tax on the sale, reducing both what the charity receives and what you save.
Publicly traded securities listed on a designated stock exchange (TSX, NYSE, NASDAQ, etc.), mutual fund units, segregated fund policies, and prescribed debt obligations. Private company shares do NOT qualify — they must be publicly traded.
The federal credit is 15% on the first $200 of donations and 33% on amounts exceeding $200 (if your income exceeds the top bracket threshold; otherwise 29%). Provinces add their own credit on top. Combined, the credit typically recovers 45-55% of the donation amount for high-income donors.
Technically you can withdraw from a TFSA and donate, but it defeats the purpose since TFSA gains are already tax-free. For RRSP, a withdrawal triggers income tax. The 0% inclusion benefit only matters for appreciated securities in a non-registered (taxable) account where you would otherwise owe capital gains tax.
You can claim donation credits up to 75% of your net income in a given year. Unused credits can be carried forward for up to 5 years. In the year of death (and the preceding year), the limit increases to 100% of net income.