Share donation vs cash — what's the tax difference?
Donating publicly-traded shares directly to a Canadian charity eliminates the capital gains tax that would apply if you sold them first. This calculator shows the difference for your specific shares — by province, by cost base, by FMV.
- Capital gain realized: $40,000
- Tax on gain: $10,706
- Charitable credit on donation: $25,205
- Capital gain inclusion: 0% (s.38(a.1))
- Tax on gain: $0
- Charitable credit on donation: $25,205
How this works (and why)
Under Canada's Income Tax Act s.38(a.1), the taxable capital gain on publicly-traded securities donated directly to a registered Canadian charity is reduced to zero. Selling the shares first and donating the cash triggers the full 50% capital gain inclusion on the sale.
Both paths produce the same donation receipt for the same FMV, so the charitable tax credit is identical. The difference comes entirely from the capital gains tax avoided on Path B.
This calculator uses the donor's top combined federal-plus-provincial marginal rate by province. Donors at lower brackets will see proportionally smaller savings.
Figures shown are approximate, calculated from current publicly-available statutes and standard formulas. Final amounts depend on your specific circumstances — assets in your name versus jointly held, beneficiary designations, debts, province-specific exemptions, and applicable tax credits. For numbers you can act on, a Canadian accountant or licenced estate planner can verify against your actual situation.
Frequently asked questions
Why is donating shares better than donating cash?
When you donate publicly-traded securities directly to a registered Canadian charity, the Income Tax Act eliminates the taxable capital gain on those shares (s.38(a.1) sets the inclusion rate to 0%). If you sell the shares first to raise cash, you trigger the full 50% capital gain inclusion on the sale — and pay tax on it — before donating. Both paths produce the same donation receipt, so the difference is entirely the capital gains tax avoided.
Which securities qualify for the 0% inclusion rate?
Publicly-traded shares (TSX, TSX Venture, NYSE, NASDAQ, and other prescribed stock exchanges), publicly-traded mutual fund units, segregated funds with publicly-traded underlying investments, and certain government bonds. Private-company shares, real estate, and personal-use property do NOT qualify. The donation must be in-kind (transferring the actual shares) — not selling and donating cash.
Does this work for donations to all Canadian charities?
It works for donations to any registered Canadian charity holding a valid CRA charity registration number. Donor-Advised Funds at Canadian community foundations and the major public foundations (Charitable Impact, Aqueduct, etc.) also accept in-kind share donations and qualify for the 0% inclusion treatment.
What if I want to donate shares but my brokerage charges fees?
Most major Canadian brokerages charge no fee for in-kind transfers to a registered charity. Some charities have streamlined arrangements with specific brokerages. The charity's planned-giving department typically handles the transfer paperwork and confirms the FMV on the transfer date.
Does the 0% inclusion apply to donations made at death?
Yes. A bequest of publicly-traded shares to a registered Canadian charity in your will receives the same 0% capital gain inclusion treatment as a lifetime donation. Combined with the year-of-death extension allowing the donation credit to apply against up to 100% of net income on the final return, in-kind share bequests are one of the most tax-efficient charitable structures available to Canadians.
Are there limits on how much I can donate?
Lifetime donations are limited to 75% of net income in the year of donation, with a 5-year carry-forward for unused amounts. In the year of death (and the immediately preceding year), the limit is 100% of net income — large bequests are fully claimable against the final return.