| Donor purchases a life insurance policy and makes the Diocese of Saskatoon Catholic Foundation the owner and beneficiary of the policy. The donor is entitled to a donation receipt for premiums paid to the insurance company after ownership has been transferred to the charity and for contributions made to the charity to cover the premiums. | |
|---|---|
| Face Value of Policy | $100,000 |
| Premiums paid by Donor | $35,000 |
| Foundation issues a charitable donation receipt to donor to be used on donor’s annual income tax. | $35,000 |
| Tax Credit to Donor (assuming 44%) | $15,400 |
| After-tax cost of policy ($35,000 – $15,400) | $19,600 |
| The donor receives a $35,000 tax donation receipt which amounts to a $15,400 tax credit to reduce “tax owing”. The cost of the $100,000 policy is actually only $19,600. | |
