Since 2015, Canadians have been able to avoid paying taxes on real estate investments gains by donating their proceeds to a charitable organization. You can receive a tax break when the cash proceeds from the disposition of real estate are donated to a qualified donee within 30 days.
Real Estate Gifting Realized, a new program launched by the CCIM Foundation, facilitates the donation of real estate to charitable organizations. A donation may be made directly to the CCIM Foundation, or the Foundation can facilitate the donation to a chosen charity.
How much can I save in capital gains tax?
According to the CRA, you are considered to have disposed of real estate at its fair market value when it is donated to a registered Canadian charity. Generally, 50% of the capital gain that arises from the disposition of private corporation shares or real estate is subject to tax and must be reported on the donor’s income tax return.
For example, if someone bought a piece of real estate for $100,000 and then subsequently sold it for $200,000 and then donated their proceeds of $100,000 to a charitable organization, they would be exempt from capital gains on 40% of the $100,000. Since the taxable portion of $60,000 is taxed at the 50% rate described above, the taxable portion would be $30,000.
What are my options for donating real estate?
There are several options available for donating real estate. Two of the most common methods are:
- Outright Donation – When you deed real estate to a charitable organization outright. This a clean transaction, doesn’t activate capital gains tax and results in a charitable tax deduction.
- Bequest – A bequest is not an immediate. This occurs when a charitable organization is identified as a beneficiary upon the death of the donor.
Other options that are available are Charitable Gift Annuities, Charitable Remainder Trusts ore Retained Life Interests. These options provide an income stream to the donor and can result in charitable tax deductions. CRA Guidelines for donations involving private corporation shares or real estate are available here.
Gifting real estate is a transaction that benefits both the donor and the charitable organization, It is also one of the most underutilized method for disposition of real estate in today’s market.
Sandy G. Shindleman
President & CEO
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