Charitable Giving in Canada: Should You Donate Personally or Through Your Corporation?

Tax Treatment, Planning Tips, and Strategic Considerations for BC Owner-Managers

Charitable donations are a meaningful way to support causes you care about while reducing your tax burden. But if you operate an incorporated business in Kamloops or anywhere in British Columbia, you may be wondering whether it is more beneficial to donate personally or through your corporation. The answer depends on your income level, business structure, and how the funds are being used.

Personal Donations: Tax Credits That Reduce Tax Payable

When you donate personally to a registered Canadian charity or qualified donee, you receive a non-refundable tax credit. This credit directly reduces the amount of tax you owe.

Key benefits:

• Federal credit: 15% on the first $200, 29% (or 33% for high-income earners) on amounts over $200

• Provincial credit: Varies by province; in BC, it adds roughly 5–11% depending on the amount

• Carryforward: Unused credits can be carried forward for up to five years

• Enhanced limits: In the year of death or the year before, you can claim up to 100% of net income

Considerations:

• Credits are non-refundable, so they only reduce tax payable—not taxable income

• Recent changes to the Alternative Minimum Tax (AMT) may reduce the benefit for high-income earners

Corporate Donations: Deductions That Reduce Taxable Income

Corporations receive a tax deduction, not a credit. This reduces taxable income, which lowers the overall corporate tax bill.

Key benefits:

• Deduction equals the value of the donation, up to 75% of net income

• Unused amounts can be carried forward for five years

• In-kind donations (e.g. publicly traded securities) may eliminate capital gains tax and increase the Capital Dividend Account (CDA), allowing tax-free withdrawals to shareholders

Considerations:

• The deduction is based on the corporate tax rate, which may be lower than personal rates

• Donations do not generate personal tax credits unless funds are withdrawn and donated personally

• If the corporation has surplus assets or unrealized capital gains, donating in-kind can be more tax-efficient than donating cash

Strategic Planning Tips

• Compare tax rates: If your personal marginal rate is higher than your corporate rate, donating personally may yield greater tax relief

• Use in-kind donations: Donating appreciated securities from a corporation can eliminate capital gains and boost the CDA

• Plan withdrawals carefully: If you want to donate personally but the funds are in the corporation, consider the tax cost of extracting them

• Verify charity status: Ensure the organization is a registered charity or qualified donee under CRA rules

Final Thoughts

There’s no one-size-fits-all answer. For smaller donations, personal giving may be simpler and more beneficial. For larger gifts or when donating appreciated assets, corporate giving can unlock strategic advantages. If you’re unsure, I offer advisory services to help Kamloops-based owner-managers evaluate the best approach based on their structure, goals, and tax position.