The holiday season is all about gratitude, sharing, and charitable giving. Add to that the country’s gradual recovery from COVID-19 and the approach of tax deadlines, and it’s easy to see why Canadians are thinking about giving back to their communities.
There’s even an annual giving event: GivingTuesday is a global generosity movement, taking place each year after Black Friday. The event, which will take place on November 30, is a day that celebrates generosity and encourages people to do good through fundraising, volunteering, and donating. Giving can be its own reward—but it’s also a smart way of reducing the taxes you’ll owe.
But choosing the best charities to support can be a dense, confusing process. With more than 86,000 registered charities in Canada it’s clear there’s no shortage of need—and that number doesn’t include organizations without charity status. This article will guide you through the maze of charitable giving from choosing and vetting to making the most of your contributions.
Step 1: Identify the causes you want to support
When you first start thinking about which charities to support, it’s easy to get completely overwhelmed by the sheer number of worthy causes. It’s a short leap from thinking about food banks in your neighbourhood to conservation efforts in Myanmar. In this section, we’ll lay out steps you can take to narrow down the field and identify the charity or charities you want to support.
Decide what you care about the most
The first step is to identify the type of charity or foundation you wish to support. This is easier said than done. Top-level charity types include animal welfare, environmental conservation, education, global health, community development, and more. Looking at this list, you may well feel a tug towards multiple areas.
The most effective way to focus your interest is to identify the issue that feels the most personal or personally relevant.
“We encourage donors to focus on the causes they feel most passionate about,” says GivingTuesday organizer Lys Hugessen.
In fact, personally believing in a cause is the motivator for giving for 85% of Canadians. Wanting to contribute to their communities incentivizes 79% of donors and being personally affected by a cause is also a powerful inducement (61%). Notably, tax credits take the lowest spot on the list of reasons for giving, at only 23%.
“Each person’s giving is going to be very personal, reflecting their values,” says Karen Bahen, Managing Director of Charity Intelligence Canada. She recommends setting priorities and allotting a percentage of your giving budget to each sector you wish to support. “Setting your giving sectors percentage really helps you give with intention.” Additionally, she notes, having a plan can make saying no easier.
Consider the “here and now” for effective giving
Having a multi-year giving plan is an excellent idea but there are times that call for flexibility or extra consideration. The COVID-19 pandemic has created one of those times.
If you’re looking to provide a COVID-related charitable gift, Bahen recommends you make sure you’re giving to front-line organizations rather than foundations: “You get the same tax receipt, but front-line charities need donations whereas many hospital foundations have 8+ years in reserve.” Always check whether a charity needs funding for the timeline you have in mind before you give.
“Now, more than ever, Canadian charities need whatever help they can get!” says GivingTuesday’s Hugessen, noting that the pandemic has taken a toll beyond front-line organizations. She suggests that potential donors think, too, of theatres, museums, libraries, and arts organizations.
It bears noting that while you won’t receive a tax receipt, sponsoring your coworker’s fundraising marathon for a homeless shelter or contributing to a friend’s GoFundMe are entirely worth your consideration.
“These [donations] can be in some circumstances just as effective and have as much impact as giving to a registered charity,” Bahen notes.
You may not get a tax break but you’ll help out someone in your direct community.
Step 2: Do your due diligence
Deciding on the charity or charities you’d like to support is only the first step. But make sure to do your homework before giving money to a cause.
“Whatever the cause that moves your heart, do your research,” urges Bahen, adding that the top concerns for Canadians tend to be how a charity spends money and how a charity has an impact.
Many donors also worry about high fundraising costs. Here’s how to do your due diligence to make sure your money’s going to the right place.
Check out the charity’s website
Your first stop should be your selected charity’s website, where you can find vital information about the charity. That includes the organization’s mission, vision, and values, statements that clarify what they are seeking to do, how they’re trying to accomplish their goals, and the values they follow in their work. Review these to affirm that this is, indeed, a charity you want to support.
An organization’s annual report is another document that may be able to tell you information about their funds, how they’re allocated, and how many people they’ve served in the previous year.
Registered vs. unregistered charities
Contrary to what you might have heard, whether a charity is registered or not says little about how it’s run or the impact of its philanthropy.
“A charity has to have a registration number issued by the government of Canada in order for the donation to be a qualifying tax credit,” explains Patrick Payne, senior accountant and owner of Your Modern Accountant Ltd. But registration doesn’t guarantee much else.
If you’re not interested in tax deductions, checking registration status isn’t a very good way of judging a charity’s work.
“An individual may want to look into how that money is spent internally within that charitable organization,” Payne says.
Look at independent sites
Rating or grading charities is a tricky endeavour because there are so many variables in play but numerous sites can help supply useful information.
If you’re interested in supporting a registered charity, you can do an easy search on the Canada.ca site. For in-depth, qualitative research about a charity’s income and spending, and programs and reach, there are numerous sites to consult including with Charity Intelligence Canada.
“Our Top 100 is a good place to start,” Bahen says.
Reports include a star rating based on financial transparency, results reporting, demonstrated impact, the need for funding, and the percentage of each dollar that goes to the cause (rather than to administration and management). For similar information on non-profits in the United States, check GuideStar.
Time your giving
If you’re hoping to maximize the impact of your dollars, it’s worth asking about fundraising opportunities like matching offers where donations are doubled with input from another fund.
“[Leading up to GivingTuesday] we see a lot of great matching offers but we seldom know in advance where to direct people,” says Hugessen. Your best bet is to contact your charity of choice directly.
Step 3: Consider your taxes
If you give to a registered charity, you’ll get a tax receipt which you can use to reduce the amount of tax you owe. The amount of the credit varies according to how much you give and where you live.
“The first $200 of a charitable donation will give the individual a tax credit of 15% federally and 29% above that,” says Patrick Payne. “Provinces also have a tax credit for donations with a similar structure.”
In Ontario, for example, the rate is 5% on the first $200 and about 11% after that. Because you only save a portion of the donation amount on your taxes, there’s not an “optimal” amount to give to charity.
“In Canada, the limit to an individual’s annual charitable donation is 75% of their taxable income,” says Payne. “People should want to give for their own reasons—but remember that a tax incentive is there if they do.”
Also note that each registered charity offers a tax receipt, but there are some other organizations that will as well.
“Greenpeace is a non-profit rather than a registered charity,” says Bahen, noting that they offer tax receipts. “UNHCR isn’t a registered charity in Canada, but because it is a UN agency, you get a tax receipt.”
When in doubt, you can reach out to the organization in question.
Step 4: Consider other ways to give
Financial contributions are only one way to support charities. “If a financial donation works, that’s great,” Hugessen says. “If not—or in addition—consider volunteering, joining a food or clothing drive, a neighbourhood cleanup, giving blood, or getting active to support your cause on social media.”
Unsure where to start? The GivingTuesday site has compiled a handy list.
Selecting the charities you want to support involves some research but the benefits are worth it. Follow your heart, do your due diligence, and get involved.