As tax season approaches, the landscape of Canadian charitable giving reveals a complex and evolving picture of generosity. In 2022, just under 5 million Canadian tax filers—representing 17.1% of all tax filers—declared charitable donations, marking a subtle but significant shift in philanthropic trends. This statistic doesn’t account for those people who donate in other ways (i.e. non-receiptable donations, volunteering, etc.) and was still a statistic at that was influenced by COVID-19.

The Changing Dynamics of Giving

The narrative of Canadian charitable giving is nuanced and multifaceted. Total donations in 2022 decreased by 3.1% to $11.4 billion, a notable change after years of growth (likely due to the economics uncertainty during COVID). This decline challenges the conventional understanding of philanthropy and invites a deeper exploration of the factors influencing charitable contributions.

Demographic Insights

The profile of Canadian donors presents a rich tapestry of giving:

• Age and Generosity: Age plays a crucial role in charitable giving. While only 4.8% of tax filers under 25 reported donations, this proportion dramatically increases with age, peaking at 23.9% for those 65 and older. Seniors are particularly generous, accounting for 34.2% of charitable donors and contributing $48 of every $100 donated in 2022.
• Income and Giving Patterns: Charitable giving is strongly correlated with income. Only 6.2% of tax filers earning under $40,000 made donations, compared to 39.2% of those earning $100,000 or more. The median income of donors ($71,240) significantly outpaces the median income of all tax filers ($41,930). It should be noted, however, that donations as a percentage of your income is inversely related. Those with lower income tend to donate a larger proportion of their income than do those with high earnings.

Emotional Connections and Strategic Giving

The motivations behind charitable giving remain deeply personal and complex:

• Emotional Connections: Personal experiences continue to drive philanthropic choices. A parent who has experienced a child’s serious illness might become a passionate supporter of pediatric research. These emotional connections transform charitable giving from a transactional act to a deeply personal mission of hope and healing.
• Sense of Obligation: A significant driver of charitable giving is a deeply ingrained sense of social responsibility. This stems from cultural values, community expectations, and a collective understanding that societal challenges cannot be addressed by governments alone.

Emerging Trends and Challenges

The 2022 data reveals some intriguing shifts:

• Mid-sized donations increased, with the median donation rising to $380
• Fewer large donations were reported, with a 12.4% decline in donations over $100,000
• Higher-income groups continue to dominate charitable giving, accounting for 59.1% of total donations

Comparative Tax Benefits: Canada vs. US

The approach to charitable giving tax benefits presents fascinating contrasts between Canada and the United States, particularly in how each country recognizes and incentivizes philanthropic contributions.

Canadian Tax Credit System

Canada offers a two-tiered federal tax credit system designed to encourage charitable giving:

• 15% tax credit on the first $200 of donations
• 29% tax credit on donations exceeding $200
• Additional provincial tax credits that vary by province

This system provides a progressive incentive, with higher-percentage credits for more substantial donations. The goal is to make charitable giving more financially attractive, especially for donors who can contribute larger amounts.

United States: Comprehensive Charitable Deduction System for Tax Returns

The United States offers a robust charitable deduction system, providing significant tax incentives for charitable giving:

Charitable Contribution Deductions

• Taxpayers can deduct charitable contributions to qualified organizations
• Donations can be claimed as itemized deductions
• Deduction limits vary based on the type of donation and organization:
  • Cash donations: Up to 60% of adjusted gross income (AGI)
  • Appreciated property donations: Up to 30% of AGI
  • Different limits apply for certain types of donations and organizations

Tax Deduction: Volunteer Expenses

The United States also recognizes the economic value of volunteer contributions through specific tax provisions:

Qualified Volunteer Expense Deductions Include:

• Mileage driven for charitable purposes (at a standard rate set by the IRS)
• Supplies purchased specifically for charitable work
• Uniform costs required for volunteer service
• Travel expenses directly related to volunteer activities

Comparative Analysis of Tax Treatments

While both countries aim to incentivize charitable giving, their approaches differ significantly:

• Canada focuses on direct donation tax credits
• The United States extends recognition to the economic contribution of volunteer time and associated expenses
• Both systems ultimately seek to encourage greater social engagement and support for charitable organizations

The volunteer expense deduction in the U.S. reflects a broader recognition of the non-monetary contributions individuals make to their communities. It acknowledges that philanthropy extends beyond financial donations, valuing the time, effort, and personal resources volunteers invest in charitable causes.

Emerging Trends and Challenges

While the total value of donations has fluctuated, the spirit of Canadian generosity remains resilient. The most impactful donors are those who give from a place of genuine commitment and compassion, understanding that their contributions create ripple effects far beyond financial transactions.

As you prepare your income tax return this season, view potential charitable donations as an opportunity for personal and social transformation. The tax credit can be seen as a thank-you from the government for your commitment to building a better community and world.

Remember, your generosity has the power to create meaningful change, regardless of the size of your contribution.

Until next week.

L’chaim,

jack