How to Donate XEQT Shares to Charity and Pay Zero Capital Gains Tax in Canada

A friend of mine – I’ll call her Priya – had one of those incredibly generous years in 2024. She’d been holding XEQT in her non-registered account for a few years, the shares had roughly doubled, and she decided to donate $10,000 to her local hospital foundation.

Here’s what Priya did: she sold $10,000 worth of XEQT, paid capital gains tax on roughly $5,000 of gains, then donated the cash. She felt great about it – until I showed her the math over coffee.

By selling first, Priya owed about $1,250 in capital gains tax before the money ever reached the charity. She got a donation tax credit on the $10,000 cash gift, sure. But she could have donated those exact same XEQT shares directly to the hospital – paid zero capital gains tax – and still received a donation tax credit on the full $10,000 market value.

She left roughly $1,250 on the table. Money that could have stayed in her pocket or gone to the charity instead.

I don’t want you to make the same mistake. This guide covers everything you need to know about donating appreciated securities like XEQT directly to charity in Canada – the CRA rules, the step-by-step process, the math, and the situations where it makes sense (and where it doesn’t).

1. How In-Kind Donations of Public Securities Work in Canada

The Canadian government really wants to encourage charitable giving of securities. So much so that they created one of the most generous tax incentives in the entire Income Tax Act.

Here’s the rule in plain English:

When you donate publicly traded securities (like XEQT) directly to a registered Canadian charity, the capital gains inclusion rate on those securities drops to zero.

That means if you bought XEQT at $25 per share and it’s now worth $35 per share, you have a $10-per-share gain. Normally, you’d pay tax on 50% of that gain if you sold. But if you donate those shares directly to a qualifying charity, you pay absolutely nothing in capital gains tax.

And you still get a donation tax credit based on the full fair market value of the shares at the time of the donation.

It’s a double win. You avoid the tax bill and you get a credit for giving.

This applies to any publicly traded securities listed on a designated stock exchange – which includes all major Canadian and U.S. exchanges. XEQT trades on the Toronto Stock Exchange, so it absolutely qualifies.

2. The Double Tax Benefit: Zero Capital Gains + Full Donation Tax Credit

Let me break down why this strategy is so powerful. When you donate appreciated XEQT shares directly, you get two distinct tax benefits at the same time:

Benefit 1: The capital gain disappears. You don’t pay a single dollar of tax on the appreciation. Not 50% inclusion, not 66.7% inclusion – zero. The entire gain is wiped out for tax purposes.

Benefit 2: You receive a donation tax credit on the full market value. The charity issues a tax receipt for the fair market value of the shares on the day of the donation. You claim that receipt on your tax return just like any cash donation, and the credit is calculated at the same federal and provincial rates.

No other strategy in Canadian tax law gives you both of these benefits simultaneously. It’s not a loophole. It’s an intentional policy designed to channel more money toward charities.

Think of it this way: the government is saying, “We’ll give up the capital gains tax revenue we would have collected – as long as that money goes to charity instead of your pocket.” Everybody wins.

3. The Math: Selling Then Donating Cash vs. Donating Shares Directly

This is where the numbers speak for themselves. Let’s walk through a realistic example using $10,000 worth of XEQT with a $5,000 unrealized capital gain.

Assumptions:

• You originally purchased XEQT shares for $5,000 (your adjusted cost base)
• Those shares are now worth $10,000 (fair market value)
• Your unrealized capital gain is $5,000
• Your marginal tax rate is 40% (combined federal + provincial)
• You want to donate $10,000 to a registered charity
• Donation tax credit rate is approximately 45% on amounts over $200 (combined federal + provincial – varies by province)

The difference is stark. Donating shares directly gives you a net tax benefit of $4,500 compared to as little as $3,050 when you sell first and donate the after-tax proceeds. That’s up to $1,450 more in your pocket – or if you redirect those savings, $1,450 more for another charity.

And the bigger the unrealized gain, the bigger the advantage. If your XEQT shares have tripled or quadrupled in value over the years, the tax savings from donating in-kind are enormous.

4. Which Charities Accept Securities Donations?

The answer is almost certainly yes – most registered Canadian charities can receive gifts of publicly traded securities, though the process varies by size.

• Large charities (hospitals, universities, United Way, Red Cross) usually have a dedicated brokerage account and a “gifts of securities” page on their website with instructions.
• Medium and small charities can open a brokerage account to receive your shares. You may need to walk smaller organizations through the process.

The critical rule: The shares must be transferred directly from your brokerage account to the charity’s brokerage account. If you sell first and send cash, you’ve triggered the capital gain and lost the zero-inclusion benefit.

Before starting, contact the charity and ask:

1. Do you accept gifts of publicly traded securities?
2. Can you provide your brokerage account details (institution, account number, DTC participant number)?
3. What forms or letters of direction do I need to complete?

5. How to Donate XEQT Shares Through Wealthsimple

If you hold XEQT on Wealthsimple, here’s the process for donating shares in-kind. It’s more manual than selling, but it’s straightforward once you know the steps.

Step 1: Contact the Charity First

Reach out to the charity’s development or finance team. Ask if they accept gifts of securities and get their brokerage account details. You’ll need:

• The name of the charity’s brokerage firm
• The brokerage account number
• The DTC participant number (for electronic transfers)

Step 2: Initiate the Transfer with Wealthsimple

Contact Wealthsimple support (through the app or by email) and let them know you want to transfer shares as a charitable gift. You’ll typically need to provide:

• The ETF ticker (XEQT) and number of shares to donate
• The charity’s name and brokerage details
• A letter of direction authorizing the transfer

Wealthsimple may have a specific form for this. Ask their support team for the exact requirements – the process may be updated from time to time.

Step 3: Wait for the Transfer to Complete

The transfer typically takes 5 to 15 business days, depending on the brokerages involved. The shares leave your account and arrive in the charity’s brokerage account.

Step 4: Get Your Donation Receipt

Once the charity receives the shares, they will issue an official donation receipt. The receipt should reflect the fair market value of the shares on the date the transfer was initiated (the date you gave up control of the shares). This is typically the closing price of XEQT on the transfer date multiplied by the number of shares donated.

Step 5: Claim the Credit on Your Tax Return

Report the donation on Schedule 9 of your tax return. Attach or retain the donation receipt. The capital gain will appear on your T5008 slip from Wealthsimple, but you’ll report it as a qualified donation of securities, which means the inclusion rate is zero.

6. Donor-Advised Funds (DAFs) in Canada

If you want even more flexibility, consider a donor-advised fund (DAF). Think of it as a charitable savings account: you transfer appreciated XEQT shares into the DAF, receive your tax receipt immediately (with zero capital gains, just like any qualifying securities donation), and then recommend grants to specific charities on your own schedule.

In Canada, community foundations (Vancouver Foundation, Toronto Foundation, etc.) and charitable gift funds run by financial institutions offer DAFs.

Why use a DAF?

• Timing flexibility. Donate shares in a high-income year for maximum credit, then distribute grants over several years.
• Simplicity. One transfer to the DAF instead of coordinating with multiple charities.
• Growth. Funds inside the DAF can grow tax-free while you decide where to direct them.
• Anonymity. Many DAFs let you make grants anonymously.

The main downside: DAFs typically charge annual fees (0.5% to 1.0% of assets) and may require minimum initial contributions of $10,000 to $25,000. But for regular givers who want to batch donations for tax efficiency, they’re worth exploring.

7. How the Donation Tax Credit Actually Works

I find a lot of Canadian investors are fuzzy on how donation tax credits are calculated. It’s not a deduction from your income – it’s a credit against your tax owed, which makes it valuable regardless of your income level.

Federal Donation Tax Credit Rates

The federal government calculates your donation tax credit in two tiers:

• First $200 of donations: 15% credit rate
• Donations above $200: 33% credit rate (if your taxable income exceeds the top federal bracket, approximately $246,752 in 2026) or 29% credit rate otherwise

Provincial Donation Tax Credit Rates

Each province adds its own credit on top of the federal credit. Here are a few examples of the combined rate on donations over $200:

These rates are approximate and may vary based on your specific income level and the current tax year. Always verify with the CRA or a tax professional.

What This Means in Dollar Terms

Let’s say you donate $10,000 of XEQT shares directly to charity and you live in Ontario:

• Credit on first $200: $200 x ~20% (federal + provincial) = $40
• Credit on remaining $9,800: $9,800 x ~40% = $3,920
• Total donation tax credit: approximately $3,960

That’s nearly $4,000 back on your tax bill – and remember, you also paid zero capital gains tax on the appreciation. If those shares had a $5,000 gain, you avoided roughly $1,000 in capital gains tax on top of the credit.

The combined benefit can easily exceed $5,000 on a $10,000 donation. That’s the power of donating appreciated securities.

8. Strategic Timing: When to Donate for Maximum Benefit

Not all years are created equal. Donating in a high-income year amplifies your tax savings because the capital gains tax you avoid is calculated at your marginal rate – the higher your bracket, the more you save.

Best times to donate appreciated XEQT shares:

• Large bonus or commission year. The donation credit offsets some of that extra income.
• You exercised stock options or sold a business. Large one-time income events are ideal for charitable giving.
• Peak earning years before retirement. If you expect lower income soon, donating now gives a bigger benefit than donating later.
• Year with a large realized capital gain from selling property or another investment.

The Bunching Strategy

If you normally give $2,000 to $3,000 per year, consider “bunching” several years of giving into one larger donation of XEQT shares. A single $10,000 donation is more tax-efficient than five separate $2,000 donations because you only “waste” the lower credit rate on the first $200 once instead of five times. Pair this with a donor-advised fund and you get the tax receipt now while distributing grants over the next five years.

9. CRA Rules and Limits You Need to Know

The CRA is generous with this incentive, but there are limits and rules.

The 75% Net Income Limit

In most years, you can claim donation tax credits on up to 75% of your net income. For donations of publicly traded securities (like XEQT), this limit is effectively increased because the capital gain that would normally be included in your income is eliminated – so the “net income” denominator can actually be lower, giving you more room.

For most people, this limit is not a problem. You’d need to donate a very large percentage of your income for it to matter.

The 5-Year Carry Forward

If your total donations exceed the claimable limit in a given year, you can carry forward the unused portion for up to 5 years. This means you never lose a donation credit – you just claim it in a future year when you have room.

This is particularly useful if you make a one-time large donation of appreciated XEQT shares. Even if you can’t use the full credit this year, you have five more years to use it up.

Donations in the Year of Death

There’s a special rule for the year of death: the 75% limit is increased to 100% of net income, and unused credits can also be carried back to the prior year at the 100% limit. This makes donating appreciated securities through your estate plan extremely powerful. If you hold significant XEQT in a non-registered account, including a charitable gift in your will can offset the deemed disposition that happens on death.

The Receipt Must Match the Transfer

The charity must issue an official donation receipt that includes:

• The fair market value of the shares on the date of the gift
• A description of the securities (e.g., “350 shares of iShares Core Equity ETF Portfolio, ticker XEQT”)
• The date the gift was made
• The charity’s registration number

The CRA can deny the credit if the receipt doesn’t meet their requirements, so double-check it.

10. Common Mistakes to Avoid

I’ve seen people make these mistakes, and each one can cost you real money.

Mistake 1: Selling the Shares First, Then Donating Cash

This is the big one – and exactly what my friend Priya did. If you sell the shares, the capital gain is triggered immediately. You can’t undo it. The zero-inclusion benefit only applies when the shares are transferred directly to the charity without passing through your hands as cash.

The fix: Always transfer in-kind. Never sell first.

Mistake 2: Donating Shares That Are at a Loss

This is a sneaky trap. If your XEQT shares have dropped below your adjusted cost base, donating them in-kind means you lose the capital loss entirely. You can’t claim a capital loss on donated securities.

The fix: If your shares are underwater, sell them first, claim the capital loss through tax-loss harvesting, and donate the cash. You get both the capital loss deduction and the donation credit. Best of both worlds.

Mistake 3: Not Getting a Proper Donation Receipt

Without an official receipt from a registered charity, you cannot claim the donation tax credit. Period. Some smaller charities may take time to issue receipts, or they may not include the required details.

The fix: Follow up with the charity and verify the receipt contains all the required CRA information. Don’t assume it’s handled.

Mistake 4: Donating from a TFSA or RRSP

Shares in a TFSA grow tax-free, and RRSP withdrawals are taxed as income regardless. Donating from these accounts doesn’t give you the zero-inclusion benefit because there’s no capital gain to eliminate. In fact, withdrawing from an RRSP to donate triggers income tax on the withdrawal.

The fix: Only donate from your non-registered (taxable) account to maximize the benefit.

Mistake 5: Ignoring the Adjusted Cost Base

If you’ve been buying XEQT over time through dollar-cost averaging, your ACB is the average cost of all your shares, not the cost of any specific lot. Make sure you know your true ACB before deciding whether the donation makes tax sense.

The fix: Track your ACB carefully. Wealthsimple shows your book value in the app, and tools like AdjustedCostBase.ca can help if you’ve transferred shares between brokers.

Mistake 6: Waiting Too Long and Missing the Tax Year

The donation must be completed (shares transferred) by December 31 to count for that tax year. Since in-kind transfers take 5 to 15 business days, don’t start the process on December 28.

The fix: If you’re planning a year-end donation, start the process in late November or early December at the latest.

11. When This Strategy Makes Sense vs. When It Doesn’t

Donating XEQT shares directly to charity is a fantastic strategy, but it’s not for everyone in every situation. Here’s a framework for deciding.

This Strategy Makes Sense When:

• You have significant unrealized gains in XEQT held in a non-registered account. The larger the gain, the bigger the tax benefit.
• You were already planning to give to charity. This isn’t about creating a reason to donate – it’s about donating in the most tax-efficient way when you’ve already decided to give.
• You’re in a high-income year. The capital gains tax you avoid is calculated at your marginal rate, so higher income means higher savings.
• You want to rebalance anyway. If you have more XEQT in your non-registered account than your target allocation, donating some shares achieves both goals simultaneously.
• You’re doing estate planning. Including a gift of securities in your will can offset the deemed disposition at death.

This Strategy Doesn’t Make Sense When:

• Your XEQT shares are at a loss. Sell them, claim the loss via tax-loss harvesting, and donate cash.
• Your shares are in a TFSA, RRSP, or other registered account. No capital gains benefit from in-kind donation.
• The gain is tiny. If you bought XEQT recently and the shares have barely appreciated, the tax savings from avoiding the capital gain are minimal. You might as well just donate cash for simplicity.
• You need the shares for your own financial goals. Don’t donate away retirement savings you’ll need. Charity should come from surplus, not from money you can’t afford to give.
• The charity can’t handle securities. If the process is proving impossibly complicated with a small charity, the cost of your time and frustration may not be worth it. Donate cash and keep it simple.

Final Thoughts

Donating appreciated XEQT shares to charity is one of the most elegant tax strategies available to Canadian investors. It’s not aggressive tax planning, it’s not a grey area, and it’s not complicated – it’s exactly what the Income Tax Act was designed to encourage.

If you’re already giving to charity (or planning to), and you hold XEQT with unrealized gains in a non-registered account, donating the shares directly is almost always better than selling first and giving cash.

The key steps are simple:

1. Check your unrealized gains in your non-registered account
2. Contact the charity to confirm they can accept securities
3. Initiate an in-kind transfer through your brokerage (don’t sell first!)
4. Get your donation receipt and keep it for your records
5. Claim the credit on your tax return

Start building the portfolio today, and when the time comes to give, you’ll be able to give more – to the charity and to yourself.

This guide is for educational purposes only and does not constitute financial, tax, or legal advice. Tax rules are complex and can change. The donation tax credit rates, capital gains inclusion rates, and CRA rules referenced here are based on information available as of 2026 and may vary by province and individual circumstance. Please consult a qualified tax professional or financial advisor before making any decisions about donating securities or claiming tax credits. Your specific situation may differ from the examples shown.