Unlocking Tax Advantages This Donation Season: Donating Securities In Kind

 

Clients seeking to maximize both their charitable impact and tax efficiency are increasingly turning to donating securities in-kind. This strategy offers additional tax benefits compared to traditional cash donations, and can be part of a broader philanthropic or estate plan, thereby maximizing charitable impact while minimizing tax burdens.

 

What Are In-Kind Donations of Securities?

An in-kind donation involves transferring ownership of publicly traded securities (such as stocks, bonds, or mutual funds) directly to a registered charity, rather than liquidating the assets and donating the cash proceeds. While any publicly traded security can be used, those with the highest unrealized capital gains are typically chosen to minimize tax burdens upon sale or estate time.

Key Tax Advantages

1. Elimination of Capital Gains Tax

When you donate securities in-kind, you avoid paying capital gains tax on the increase in value since you acquired the asset. Normally, selling the security would trigger a taxable event. By donating directly, the capital gain is not realized. This applies only to the capital gains on the quantity of securities donated.

2. Charitable Donation Tax Credit

You receive a tax receipt for the full fair market value of the securities at the time of the donation. This can be claimed as a charitable donation tax credit, reducing your overall tax payable.

Considerations for Investors

1. Eligible Securities

Most charities only accept publicly traded securities. Private shares or restricted securities may not qualify as an eligible donation.

2. Timing

The donation must be completed before year-end to claim the tax credit for that calendar year.

3. Documentation

Ensure you receive and file the proper tax receipts provided to you from the registered charity and keep records of the original purchase price (Adjusted Cost Base) to properly account for the donation while filing your taxes.

Steps to Donate Securities In-Kind

1. Initiate Transfer: Work with your investment advisor or brokerage to fill out the appropriate donation form and begin the transfer of the securities on your behalf.
2. Receive Tax Receipt: The charity will issue a receipt for the fair market value on the transfer date directly to you.
3. Report on Tax Return: Claim the donation on your tax return using the supporting tax receipt.

Donating securities in-kind is a powerful tool for investors who want to support causes they care about while also optimizing their tax position.

If you have any questions about donations in-kind for the 2025 tax year, reach out to the Johnson, Johnston and Macrae Investment Group at 613 531 5520 or Kirsten.Edgley@cibc.com before December 15^th for sufficient processing time.