Using Recent Tax Changes to Do Well and Do Good
The Canadian tax landscape shifted dramatically this summer when the Federal Government proposed to raise the capital gains inclusion rate. As corporations, trusts, and individuals prepare for potentially higher taxes on capital dispositions, tax expert Jay Goodis shares opportunities for philanthropic Canadians.
“Strategic philanthropy can effectively reduce tax liabilities while increasing the positive impact of donations within the community,” says Goodis. “For donors looking to create meaningful change, there is an opportunity to make a timely gift that aligns with their financial and philanthropic goals.”
Goodis, a Chartered Professional Accountant (CPA) and Canadian tax expert, is the CEO of Tax Templates Inc., a leading tax planning software company. Known for his extensive knowledge of Canadian taxation, Goodis regularly speaks across the country on tax issues affecting corporations and individuals. He has testified before the Standing Committee of Finance and provided tax policy recommendations to Parliament. Goodis is also a board member of the KGH Foundation and is set to share his expertise at an upcoming educational event on November 6 called ‘Tax Talk’.
“As a board member and CPA, I appreciate the KGH Foundation’s commitment to educating the community on tax trends,” Goodis adds. “This event will equip advisors with insights into recent tax changes, allowing them to help clients make informed decisions that support both their financial health and our community’s health care initiatives.”
Changes to the Capital Gains Inclusion Rate
The Canadian Federal Government proposed an increase to the capital gains inclusion rate from 50% to 66.67% for certain taxpayers, affecting capital gains realized after June 24, 2024. For corporations and most trusts, this means all capital gains will now be taxed at the higher rate. For individuals, capital gains up to $250,000 will be taxed at the 50% rate but gains beyond this threshold will be subject to the two-thirds rate.
Strategic Philanthropy Examples
Sale of Small Business Shares and the Alternative Minimum Tax (AMT)
When a small business owner sells shares of their company, they may face higher capital gains taxes as well as the Alternative Minimum Tax (AMT) which could further increase their tax obligations. For those who plan to donate part of the after-tax proceeds, this is especially relevant as AMT may impact the benefit of charitable contributions.
Additionally, if a buyer insists on purchasing assets of a corporation rather than shares, the seller could face higher rates on the sale of the assets, which could result in lower after-tax cash proceeds. Given the changes to the capital gains inclusion rate, business owners planning to sell should determine the optimal type of sale to leverage the lifetime exemption effectively (where possible) and employ tax-efficient charitable giving strategies to minimize tax liabilities.
Donating Capital Property from a Corporation
Strategic tax advantages can be used to donate capital property from a corporation directly to a charity. By donating the asset itself, rather than liquidating it and donating the cash, the corporation could be exempt from paying capital gains tax on the appreciation of the property, even with the higher inclusion rate.
A well-planned approach ensures the donation aligns with the taxpayer’s goals while leveraging available tax benefits to offset taxes – such as the donation deduction, the tax savings on the appreciation, and increases to the Capital Dividend Account. As a result, donating eligible capital property from a corporation remains a beneficial option because it allows businesses to reduce the cost of charitable giving while supporting their philanthropic objectives.
For more tax smart strategies, read “Donating stock to KGH Foundation is a ‘win-win’ way of helping.”
Learn More Strategies at ‘Tax Talk’ on November 6th
To help professionals and interested community members better understand changes in Canadian tax legislation and policy, the KGH Foundation is hosting an insightful session with Jay Goodis. Tax Talk will dive into the specifics of the new rules and explore strategies to manage their impact effectively.
For more information about optimizing your donation, visit the KGH Foundation website or call Colleen Cowman, Director of Planned Giving, at 250-862-4300, ext. 7011.
Since 1978, the KGH Foundation has worked with a generous community to raise funds to support world-class healthcare close to home for a growing and diverse population in the interior of B.C. Today, the KGH Foundation is the lead fundraising organization for Kelowna General Hospital, JoeAnna’s House, and Central Okanagan Hospice House, while also fundraising for vital community health care programs.
