Jake, age 65 with a $40,000 income could leave $50,000 to a charity, non-profit sport organization, church or other organization that qualifies with CRA as a charitable donation, for only $1,046 a year.
How is this possible?
Jake has a $40,000 income and a marginal tax rate of 27.5%, but when he gives to a charity he gets a 43.3% tax credit on everything he donates over $200 up to 75% of his income. How is that possible? It is possible because a tax credit is more valuable than a tax deduction.
So how does he turn $1,046 a year into $50,000?
Jake buys a $50,000 life insurance policy. He makes a charity the beneficiary and the owner of the policy. He pays the premiums of $1,786 a year. The charity issues him a receipt for his premiums which triggers tax credits of $740. That’s how it costs him only $1,046 a year to leave $50,000.
Sally, age 50 could leave $100,000 for $486 a year after calculating tax credits.
1 comment:
I never even realized this was possible!
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