Quick answer: Donating publicly-traded securities in-kind to a registered Canadian charity eliminates the capital-gains tax on those securities AND gives you the donation credit on the full fair market value. It’s the most tax-efficient way to make a large gift.
What this means: If you have $10,000 of stock with a $4,000 gain, donating in-kind saves you the tax on $4,000 of capital gains (about $1,000 in most provinces) plus gives you the donation credit on $10,000 (about $4,500 combined federal + provincial). Donating cash after selling would only give you the $4,500.
What to do next: Estimate the credit on a hypothetical $10,000 securities donation. Run the numbers →
The capital-gains exemption rule
Under Income Tax Act section 38(a.1), capital gains realized on the in-kind donation of certain publicly-traded securities to a registered charity are deemed to be zero. This is a complete exemption — no tax on the gain. Combined with the donation credit on the security’s fair market value, the effective after-tax cost of giving is much lower than donating cash.
What qualifies
The exemption applies to in-kind donations of:
- Stocks listed on a designated stock exchange (TSX, TSXV, NEX, NYSE, NASDAQ, AMEX, etc.)
- Shares of a public mutual fund corporation
- Units of a mutual fund trust (segregated fund and standard mutual fund units)
- Bonds and other debt obligations listed on a designated exchange
- Government of Canada bonds
- Ecologically-sensitive land (separate program with its own rules)
Private-company shares, real estate other than ecological gifts, art, and cryptocurrency do not qualify for the capital-gains exemption (though they may still receive a donation credit at fair market value with a different procedure).
Worked example
Tara holds 500 shares of a TSX-listed stock she bought for $20/share ($10,000 cost). The stock is now $40/share ($20,000 fair market value). She wants to give $20,000 to charity.
| Strategy | Capital-gains tax | Donation credit (ON, $90K income) | Net cost |
|---|---|---|---|
| Sell shares first, donate $20,000 cash | $2,500 (50% inclusion on $10K gain at ~50% marginal rate) | $8,200 | $14,300 (after considering the tax bill on the sale) |
| Donate the 500 shares in-kind | $0 | $8,200 | $11,800 |
The in-kind donation saves Tara $2,500 in capital-gains tax. Same $20,000 to the charity, $2,500 better outcome for the donor.
How to donate securities in-kind
- Confirm the charity has a brokerage account that can receive securities — most major Canadian charities do, but smaller ones may not. Ask before initiating the transfer.
- Get the charity’s broker information (institution, account number).
- Complete a transfer form with your own broker authorizing the in-kind transfer of specific securities (by ticker and number of units).
- Receipt is issued for the fair market value on the date the securities arrive at the charity’s account — not the date you submitted the transfer form. Settlement can take 3-5 business days.
- Report on Schedule 3 of your T1: the gain on Schedule 3 is reduced to zero on line 174 (the in-kind exemption).
Common mistakes
- Selling first, then donating cash. Forfeits the capital-gains exemption. Always donate the security in-kind unless the charity specifically asks for cash.
- Donating mutual fund units that have unrealized gains and embedded distributions. Year-end timing matters — donate before the distribution to avoid taxable income from the distribution.
- Forgetting that the receipt date isn’t the transfer date. December 30 transfer that settles January 3 is a January donation, claimable in the next tax year.
- Donating private-company shares thinking the exemption applies. It doesn’t. Private shares get a fair market value donation credit but the gain is fully taxable.
Frequently asked questions
- How is donating stocks to charity taxed in Canada?
- In-kind donations of publicly-traded securities to a registered Canadian charity are completely exempt from capital-gains tax. You also receive the donation tax credit on the full fair market value.
- What securities qualify for the capital-gains exemption?
- Stocks, mutual fund units, ETFs, and bonds listed on a designated exchange (TSX, TSXV, NYSE, NASDAQ, etc.). Government of Canada bonds also qualify.
- Can I donate private-company shares for the exemption?
- No. Private-company shares get a donation credit at fair market value but the capital gain remains fully taxable.
- Does the capital-gains exemption apply to cryptocurrency donations?
- No. Cryptocurrency donations are treated as a disposition at fair market value with capital-gains tax on any gain. The donation credit applies but the exemption does not.
- What date does the donation receipt show for in-kind securities?
- The date the securities settle in the charity's brokerage account — not the date you submitted the transfer form. Settlement is typically 3-5 business days after submission.
- How do I donate stocks in-kind?
- Get the charity's brokerage account information, complete an in-kind transfer form with your own broker specifying the security and number of units, and submit. Allow 3-5 business days for settlement.