TREASURER’s Blog: What qualifies as ‘Gifts in Kind’ to be eligible for a tax receipt
It’s that time of year when everyone looks forward to receiving their tax receipts for donations made in the previous year so that they can file their taxes and (hopefully) get a refund on some of the taxes they had paid.
The term ‘Gifts in Kind’ has been banded around quite a bit and so in this article, I will seek to clarify some of the items that tax receipts can be issued for as against those that do not qualify for a tax receipt from the charity. There is also a question of benefits derived from a charity and how this impacts a tax receipt. This issue will therefore be addressed as well.
What qualifies as Gifts in Kind?
Donations of cash, goods, land, or listed securities to a registered charity are eligible for a charitable tax credit. For a donation to be eligible, the transfer of ownership has to be voluntary.
Examples of donations that do usually qualify for charitable tax credits include:
- ecologically sensitive land;
- certified cultural property;
- capital property;
- personal-use property (such as paintings, sculptures, jewelry, stamps, and coins); and
- inventory (such as art, antiques, rare books).
Examples of donations that do not usually qualify for charitable tax credits include:
- contributions of services, such as time, skills, effort;
- the payment of a basic fee for admission to an event or program (for example, fees for daycare or nursery school facilities);
- the purchase price of a lottery ticket or other chance to win a prize, even though the lottery proceeds benefit one or more charities;
- the payment of tuition fees (exceptions exist);
- gift certificates donated by the issuer (may qualify under specific circumstances as indicated in CRA guidance CG-007)
In order to decide what value the charity should place on the tax receipt for a donated item the Fair Market Value (FMV) for the item has to be used. If it is an item that the FMV is not easily ascertainable and if the item is valued over $1,000, then a valuation certificate from an official Appraiser needs to be obtained.
All is not lost, however, if the gift does not qualify for a tax receipt! So if for example, a Professional wants to donate their service to a charity the CRA will allow an exchange of cheques. So the professional will issue an invoice to the charity for his/her service and they will pay the professional for their service and the professional can in turn give a cheque to the organization for the same amount as a cash donation.
What happens when there is a Benefit/Advantage?
If the donor receives something of value for the donation, (such as membership benefits or entry to fundraising events etc), then it is considered an ‘advantage’. The charity therefore has to subtract the value of the advantage from your donation in order to figure out the ‘Eligible Amount’ to place on your tax receipt. So if for example the donation is for a fundraising event and it gives the donor access to the event then the cost of the regular ticket price for the event would be deducted in order to arrive at the amount for the tax receipt.