Donate Money to a Charity and Save Money on Your Taxes – Take Part in the Fundraising Revolution

More and more pressure is being put on charities to ‘pick up the slack’ for gaps in government services; you can see this in communities all around Canada. But, unlike in Canada where additional government funding is being directed to charities taking on these roles, charities in developing countries have the pressure, with very little governmental assistance. This is why charities in Canada focused on causes in continents such as Africa are being forced to go back to the drawing board when it comes to fundraising efforts; having a small ‘world shop’ on your local high street is not going to cut it. Some charities have opted for telemarketing campaigns and TV advertising, but others have decided to ‘think outside the box’.

The average Canadian wants to donate money to a charity; we are actually quite good at it. The Canadian government knows this and encourages us by rewarding us for our efforts through taxbenefits for charitable donations. It is this governmental policy that has inspired some charities to ‘get clever’. Rather than direct fundraising, some charities are forming an association with tax shelters to help Canadians save money on taxes by making charitable donations.

Hypothetically a donation tax shelter could work like this:

· I want to buy 100 laptops for children in India. So, I go to a bank and I ask loan for the money for the 100 laptops.

· The loan will be for 4 years and I will immediately pay off the interest for 4 years of the loan. With that loan, I then go to a technology company who gives me 100 laptops.

· I get an agreement from them that I can return the same item (100 laptops) back to them and get the full amount of money reimbursed to me.

· I now donate the 100 laptops to a registered Canadian charity and get a donation receipt for the amount I paid. I attach this to my tax return and get a 40% to 50% tax credit, (depending on what province I’m in) which increases my tax rebate / tax refund.

· 3 years and 1 day later, I ask the loan company to use my 1 year of remaining interest to go to the overseas market and buy 100 laptops at a much cheaper rate than I could get from the Canadian technology company.

· After returning these to the technology company, they refund me my original money which I use to pay back my loan in full.

· So I’ve now donated 100 laptops, received a donation receipt and paid off the entire loan. My tax benefit is bigger than my cost, which is the definition of a tax shelter in the Income Tax Act of Canada.

Tax shelters are a legal form of tax avoidance, which is basically using the tax system within the limits of the Income Tax Act to save you money. This is VERY different from tax evasion / tax fraud, which is withholding money from the government illegally.

By participating in a tax shelter the average Canadian can donate thousands of dollars for equipment or life saving drugs for illness like HIV/AIDS, which would not have been feasible otherwise. The average Canadian can also save money on their taxes by taking part in this process. This is what I term a win-win-win-win system.

· Win for the charity for getting large donations

· Win for the tax payer by saving lives and saving money

· Win for the tax shelter who makes a profit from the interest on the loan

· Win for the people the charity is helping

To me, this is fundraising through the power of ideas; most of us are generous if you make it financially possible for us to be generous. By operating like a business and thinking about donating in terms of a win for all involved, some charities have managed to increase their donations rates from the thousands to the millions. Sounds like good thinking to me.

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