Making a charitable donation as part of an estate plan is an admirable way to make a lasting social impact, as well as an effective way to lower your tax expense.
Normally, up to 75% of a taxpayer’s net income can be claimed as eligible charitable donations. In the year of death, up to 100% of your net income can be claimed.
Under certain circumstances, the donation tax credit for these donations can be claimed by the surviving spouse instead of by the deceased taxpayer, against up to 75% of the surviving spouse’s net income.
This creates a substantial tax saving opportunity, while also allowing the donor to support their charity of choice, or begin a legacy by creating a charity or bursary program.
If the donation is substantial enough to eliminate all taxes owing in the year of death, there is also an option to carry the credits back, up to one year, creating additional tax savings.
When donating to a charity there are two options, and the best option will depend on your specific situation. The types of donations that exist are:
