Tax Deductions for Gifts-In-Kind

Gifts-In-Kind are a non-monetary donation to a charity. These can also be tax deductible provided you keep a few things in mind.

1. The Most Important Condition

Make sure that the charity of your choice is recognized by the Canada Revenue Agency (CRA) as a registered charity. If it doesn’t have this status, then any receipts issued by the charity and consequently your donation, won’t have any tax implications.

2. Criteria for Gifts-In-Kind

In order to get a tax receipt for a Gift-In-Kind, the donation needs to be actual property. This includes physical belongings and even real estate. The donation also needs to be permanent, it can’t be a loan.

When a charity receives a gift-in-kind, it will determine its fair market value and will issue a receipt for that amount. The receipt should specify that this is for a gift-in-kind and should also give a brief description of the item.

3. What about Services Rendered

Charities cannot issue receipts for services rendered because this is considered as volunteering. For example, if a pest control service offered to provide pest control solutions in the offices of a charity, the charity would not be able to issue a tax receipt for the time and effort spent in performing the task.  However, it might be able to issue a tax receipt for the cost of the pesticides.

4. Possible Solution for Services Rendered

In the above example, the pest control service could issue an invoice to the charity. The charity would pay that amount and the pest control service could donate the amount back to the charity thereby getting a tax receipt for the donation.

The disadvantage of this work-around is that the invoiced amount would also have to be claimed by the pest control service as an income.

Making gifts-in-kind is a very good method of supporting your favorite charities.

Syed A. Raza Professional Corporation has a team of licensed public accountants who are experienced in all matters relating to donations and charity. Contact us for a free consultation regarding your specific situation.  

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