Accounts & Tax · Giving
Donating securities to avoid capital gains
It's one of the most efficient moves in Canadian tax. Donate appreciated stocks or ETFs directly to a charity and the capital gains inclusion rate drops to zero — you pay no tax on the gain and still get a donation receipt for the full value. This guide shows how it works, what qualifies, and the math behind donating vs selling first.
The short answer
- In-kind gain0% inclusion — no tax on the donated gain
- Donation creditFull market value, same as a cash gift
- Sell first?Worse — you'd owe tax on 50% of the gain
- QualifiesListed stocks, ETFs, mutual & seg funds, bonds
Donate in-kind vs. sell first
See the capital gains tax you avoid by transferring shares directly instead of selling them.
Estimate only. The donation tax credit (roughly 40–50% of the gift above $200) applies equally to both paths and is not shown here — this compares the capital gains tax difference, which is the real advantage of giving in-kind.
Why donating in-kind beats selling first
Transferring shares directly applies a 0% inclusion rate on the gain, while selling first realizes a taxable gain.Normally, when you sell an appreciated investment, half the gain is taxable — the inclusion rateThe share of a capital gain added to taxable income. It's 50% in general, but drops to 0% on publicly-listed securities donated in-kind to a charity. is 50%. But Canada offers a powerful incentive to give: when you donate publicly-traded securities in-kindGiving the actual shares themselves rather than cash. You transfer the securities straight to the charity instead of selling them first — which is what triggers the 0% inclusion rate. — transferring the actual shares to a registered charity instead of selling them — the inclusion rate on that gain drops to zero.
The result is the best of both worlds. You receive a donation receiptA charitable tax receipt for the full market value of the gift, which generates a federal and provincial donation credit on your return. for the full market value of the shares — exactly as if you'd donated cash — and you pay no capital gains tax on the built-up gain. The capital gains tax explained guide covers the normal 50% rule this exception sits against.
A worked example
A side-by-side of selling shares and donating the cash versus transferring the shares directly.Say you own shares worth $50,000 that you bought for $20,000 — a $30,000 gain — and you're in a 43% marginal bracket. Two ways to give that $50,000 to charity:
- Sell, then donate cash. Selling realizes the $30,000 gain. Half ($15,000) is taxable, costing about $6,450 in tax. You donate $50,000 and get the receipt — but you're out the capital gains tax.
- Donate the shares in-kind. The gain's inclusion rate is 0%, so there's no capital gains tax. You donate the same $50,000, get the same receipt, and keep the $6,450.
Same gift, same donation credit — the in-kind route simply skips the tax. Use the calculator above to run your own numbers, and the capital gains calculator to see the tax on a normal sale.
What qualifies and how to do it
Listed stocks, ETFs, mutual and segregated funds, and bonds qualify; the transfer is done in-kind through your brokerage.The 0% inclusion rate applies to publicly-traded securitiesInvestments listed on a designated stock exchange — stocks, ETFs, mutual and segregated fund units, and many bonds. Private company shares don't qualify for the 0% treatment. donated to a registered charity:
- Listed stocks and ETFs on a designated exchange.
- Mutual fund and segregated fund units.
- Bonds and certain government debt.
To donate in-kind, you arrange a transfer of the shares from your brokerage account to the charity's account rather than selling them — most charities have a securities-donation form and a brokerage to receive the transfer. The key is that the shares move directly; selling them yourself first forfeits the benefit. Private company shares and real estate generally don't qualify for the 0% treatment.
See the tax on a normal sale
Compare against what a regular sale of the same shares would cost in capital gains tax.
When selling first is better
If the shares have a loss, selling first lets you claim the capital loss and then donate the cash.There's one exception to the donate-in-kind rule: if the shares have fallen in value, the in-kind benefit doesn't help — there's no gain to shelter. In that case, selling first lets you claim the capital loss (which can offset other gains), and you then donate the cash for the same receipt. The in-kind advantage only exists when there's an embedded gain to avoid.
Donating securities is also a key estate-planning tool — gifting appreciated shares during life or through a will can shrink the deemed disposition tax at death. And for retirees, large planned gifts interact with income-tested benefits, so it's worth checking against the OAS clawback.
Frequently asked questions
Quick answers on donating securities in-kind in Canada — the 0% inclusion rate, what qualifies, the credit, and donate vs sell.How does donating securities avoid capital gains tax?
When you donate publicly-traded securities in-kind directly to a registered charity, the capital gains inclusion rate on that gain drops to zero. Normally 50% of a gain is taxable; on donated securities it is 0%, so you pay no tax on the built-up gain at all. You still receive a donation tax receipt for the full market value, so you get the charitable credit and avoid the capital gains tax at the same time.
What does "in-kind" mean for a securities donation?
In-kind means you transfer the actual shares or units to the charity rather than selling them and donating the cash. The distinction matters: if you sell first and donate the proceeds, you trigger the capital gain and pay tax on half of it. If you transfer the shares directly, the gain is never realized by you and the special 0% inclusion rate applies. Most charities and brokerages have a simple form for in-kind transfers.
What securities qualify for the zero inclusion rate?
Publicly-traded securities qualify: stocks and ETFs listed on a designated exchange, mutual fund units, segregated fund units, and bonds. The donation must go to a registered charity. Private company shares and real estate generally do not get the 0% inclusion treatment, though other rules may apply. Always confirm the security qualifies before transferring.
How big is the donation tax credit?
The charitable donation credit combines a federal and a provincial credit. On the portion of annual donations above $200, the combined credit is roughly 40–50% of the donated amount, depending on your province and income. That credit is the same whether you donate cash or shares — the extra benefit of donating shares in-kind is eliminating the capital gains tax on top of the credit.
Should I donate shares or sell them and donate cash?
If you plan to give to charity and you hold appreciated shares, donating the shares in-kind is almost always better: you get the same donation receipt but avoid the capital gains tax you would owe by selling first. The larger the embedded gain, the bigger the advantage. The only time selling first makes sense is if the shares have a loss, in which case selling lets you claim the capital loss and then donate the cash.
Can a corporation donate securities too?
Yes, and there is an added benefit. When a corporation donates qualifying securities in-kind, the non-taxable half of the capital gain is added to its capital dividend account, which can later be paid out to shareholders tax-free. Combined with the 0% inclusion rate, in-kind donations are a particularly efficient way for business owners to give. This is an area where professional tax advice pays off.
This guide is for educational purposes only and is not financial or tax advice. It describes the general rules for donating publicly-traded securities under 2026 figures, including the 0% capital gains inclusion rate on qualifying in-kind donations. Donation credit rates vary by province and income, and rules differ for private shares, flow-through shares, and corporate donors. Confirm the current rules with the CRA or a qualified tax professional before acting. See our capital gains tax explained guide for the broader picture.