As time runs out for making charitable donations eligible for 2008 tax credits, Canadians should take an “investor approach” to charitable giving and explore the potential tax advantages they can reap from philanthropy, a new report from TD Economics says.

“Philanthropy is a noble action, but it doesn’t have to be done in a purely altruistic manner,” the report says. “The goal should be to maximize one’s giving at the same time as taking the maximum advantage of the tax system.”

While most Canadians are familiar with the tax credits associated with charitable giving, specific strategies can help minimize taxes in other ways.

For instance, baby boomers could use charitable donations to offset the taxes they pay on Registered Retirement Income Fund withdrawals. Using this strategy, a retiree who annually donates an amount equal to their RRIF withdrawal could receive a tax credit equal to the amount they would have to pay in tax on the withdrawal, depending on their province.

“Many baby boomers will need the income from their RRIFs for living expenses; but, for some that have significant other income sources the funds from the mandatory withdrawal are not needed. In the case of the latter, charitable donations can offset or reduce the tax hit,” the report says.

TD encourages Canadians to speak to their financial advisors about taking such an approach, and incorporating charitable giving into their ongoing financial plan, in order to maximize the tax advantages.

The report warns that solely donating through one’s estate, or waiting until the final years of life to make donations, means tax credits will be lost.

“The tax system provides generous incentives for giving and the incentives are there to be used,” it says.

The report reminds Canadians that although most people begin thinking about taxes in January and February, many forget that the deadline for making charitable donations eligible for tax credits is Dec. 31.

In the current economic environment, charities need donations more than ever, the report adds. Donations rose just 1.4% in 2007 to $8.6 billion, and the prospects for 2008 and 2009 are even bleaker.

The outlook for a recession is driving down spending — including charitable donations — by both Canadians and the government. And at the same time, the economic circumstances are boosting demand for charitable services.

“This creates a perfect storm for charities, as demand increases and financial capacity wanes,” the report says. “Consequently, it is more important now than ever that Canadians help charities to weather the storm.”

IE