💼 Tax

Donating Appreciated Securities to Charity: How to Eliminate Capital Gains Tax and Maximize Your Donation Credit

Published June 25, 2026 · 8 min read · By the WealthWise team · Updated June 25, 2026

⚠️ For information only. General facts and concepts; WealthWise is not a registered investment advisor and gives no personalized advice. Verify with the sources and consult a licensed professional before acting.

In short — Transferring stocks or ETFs with embedded gains directly to a registered charity results in a 0% capital gains inclusion rate (you pay no tax on the gain) AND earns you a donation receipt for the full fair market value — far better than selling first and donating cash.

If you hold stocks or ETFs in a non-registered account that have risen significantly in value, and you're planning a charitable gift, there's a well-established but widely underused Canadian tax strategy worth knowing: donate your securities in kind directly to the charity rather than selling them first. The result is striking — no capital gains tax on the appreciation, and a donation tax credit on the full current market value. Here's how the rule works and who benefits most.

The Problem with Selling First

When you sell an appreciated investment held in a non-registered account, you trigger a capital gain. In 2025–2026, the federal inclusion rate for individuals is 50% on the first $250,000 of annual capital gains. That means half your gain gets added to taxable income and taxed at your marginal rate.

Example: you bought an ETF for $100,000, it's now worth $160,000 — a $60,000 gain. If you sell, $30,000 is added to your income. At a combined marginal rate of roughly 46% (federal + a typical provincial rate), you'd owe around $13,800 in tax before donating a single dollar to charity.

Capital gains inclusion rate: selling vs. donating in kind

Sell the securities first 50%Donate the securities in kind 0%

50%Capital gains inclusion rate

0%Capital gains inclusion rate

Same appreciated securities, two disposition methods, two very different inclusion rates.

The In-Kind Rule: Capital Gains Inclusion Rate Falls to 0%

Canada's Income Tax Act contains a powerful exception: when you donate publicly traded securities directly to a registered charity — in kind, without selling — the capital gains inclusion rate on the disposition is reduced to 0%. You pay no capital gains tax on the appreciation, regardless of how large the gain is.

At the same time, you receive an official donation receipt for the fair market value of the securities at the time of transfer — not your cost base, but the current value. That receipt generates a federal non-refundable donation tax credit of 33% on the portion above $200 (for top-bracket donors), plus a provincial credit on top. The Canada Revenue Agency (CRA) confirms this rule on its official page on donations of listed securities.

The Critical Requirement: Transfer Must Be In Kind

The 0% rule applies only if the securities are transferred directly to the charity. If you sell first and donate the proceeds in cash, the capital gain is fully realized in the normal way — the tax advantage disappears entirely.

Here's the practical process:

Confirm the charity has a brokerage account to receive securities. Most major foundations, universities, and established charities do — but it's worth asking ahead of time.
Contact your broker to initiate an in-kind transfer of the shares or ETF units to the charity's brokerage account.
The charity typically sells the securities promptly upon receipt and issues you an official donation receipt based on the fair market value on the date of transfer.
Use that receipt to claim your donation tax credit when filing your return.

Lean toward donating securities in kind

You hold publicly traded securities with a large unrealized gain in a non-registered account
You were already planning a meaningful charitable donation this year or in the near future
Your marginal tax rate is high, making both the credit and the capital-gains elimination more valuable

Lean toward selling first / donating cash

Your securities are sitting at a loss — selling to crystallize the capital loss and donating the cash may be more advantageous
The charity you want to support cannot accept securities directly
Your holdings are inside a TFSA, RRSP, or RRIF — these don't generate taxable capital gains in the first place, so the 0% rule adds no extra benefit

Weigh your account type, gain position, and tax bracket before choosing.

Who Benefits Most from This Strategy?

This approach works best when several conditions align:

You hold publicly traded securities with a large unrealized gain in a non-registered account. (TFSA, RRSP, and RRIF accounts don't generate taxable capital gains in the first place, so the 0% rule doesn't add any extra benefit there.)
You were already planning a meaningful charitable donation this year or in the near future.
Your marginal tax rate is high, making both the credit and the capital-gains elimination more valuable.

The strategy is less compelling if your securities are sitting at a loss — in that case, selling to crystallize the capital loss and donating the cash may be more advantageous — or if the charity you want to support cannot accept securities directly.

	Option A — Sell, then donate cash	Option B — Donate securities in kind
ETF value / cost base	$160,000 value, $100,000 cost base	$160,000 value, $100,000 cost base
Unrealized gain	$60,000	$60,000
Capital gains tax paid	~$13,800	$0
Donation receipt amount	$160,000	$160,000
Additional tax savings vs. Option A	—	~$13,800

Same ETF scenario, two ways to donate — the tax outcome differs by about $13,800.

A Side-by-Side Example

Using the same scenario: an ETF worth $160,000, adjusted cost base of $100,000, unrealized gain of $60,000.

Option A — Sell, then donate cash: you pay ~$13,800 in capital gains tax. You donate $160,000 and receive a donation receipt. Your after-tax cost includes the $13,800 already paid in tax on top of the donation.
Option B — Donate securities in kind: $0 in capital gains tax. You receive a receipt for $160,000. Additional tax savings vs. Option A: ~$13,800.

Put differently, the in-kind donation lets you give more to the charity for the same after-tax cost, or give the same amount while keeping significantly more of your own money — a genuine win-win backed by the Income Tax Act and confirmed by the CRA.

Frequently asked questions

Which types of securities qualify for the 0% inclusion rate on in-kind donations?

Shares listed on a designated stock exchange, ETF units, publicly traded bonds, mutual fund units, and certain other eligible securities as defined under the Income Tax Act. Shares of private corporations and unlisted securities do not qualify for the 0% rate.

Can any registered charity receive securities in kind?

Legally, any charity registered with the CRA is eligible to receive in-kind donations. In practice, the organization needs a brokerage account to accept the transfer. Major foundations, universities, and large national charities are typically set up for this; smaller local charities may require extra steps — it's best to ask before initiating a transfer.

Does this strategy work for securities held in a TFSA or RRSP?

No. The benefit is specific to non-registered accounts. Investments inside a TFSA, RRSP, or RRIF don't generate taxable capital gains in the first place, so the 0% inclusion rule doesn't provide any additional advantage in those accounts.

How is fair market value determined for the donation receipt?

The CRA generally uses the average of the day's high and low trading prices on the date of transfer to determine fair market value. The charity issues the receipt based on this value, and that's the amount you use to calculate your donation tax credit on your return.

Sources & references

Educational content; verify figures with official sources before acting.