What is Fair Market Value in Canada?
If your Canadian charity or nonprofit receives donated goods, like a vehicle, artwork, used laptops, or even real estate, you’ll likely need to figure out the fair market value of those items. Why? Because if you're issuing a tax receipt, the Canada Revenue Agency (CRA) requires that the value on the receipt accurately reflects what the item is worth.
Let’s walk through what fair market value really means, and how your charity can determine it properly.
What Is Fair Market Value in Canada?
In simple terms, fair market value (FMV) is the price someone would pay for an item in an open, regular marketplace.
It’s what a knowledgeable buyer would pay and a willing seller would accept, without being pressured and with both having all the facts.
For example, if a donor gives your nonprofit a used printer, and similar printers are selling for around $150 online, then the fair market value is likely $150.
According to the CRA, fair market value is “the highest price, expressed in dollars, that a property would bring in an open and unrestricted market between a willing buyer and a willing seller who are knowledgeable, informed, and acting independently.”
What Is Market or Fair Value?
In Canada, people may refer to market value, fair value, or fair market value. These terms all generally mean the same thing: the amount something would reasonably sell for under normal conditions.
This is especially important when charities:
- Issue official donation receipts for non-cash gifts
- Accept in-kind donations (like equipment, vehicles, or inventory)
- Transfer property, such as land, within the organization or to another charity
How to Determine Fair Market Value for Your Charity
Here’s a step-by-step way Canadian charities and nonprofits can determine fair market value:
1. Research the Item in the Canadian Market
Look at what the same or similar items are selling for in Canadian stores, online marketplaces like Kijiji.ca, eBay.ca, or Facebook Marketplace, or local classified ads.
Example:
If your nonprofit receives a donation of a used iPad, check the current selling prices for the same model in Canada. That average becomes a strong starting point for fair market value.
2. Consider Condition and Age
A used item won’t be worth the same as a new one. If the item is worn, outdated, or missing parts, its value will drop. You need to account for:
- Age
- Wear and tear
- Working condition
3. Get an Independent Appraisal (if needed)
If the item is worth more than $1,000, the CRA recommends getting a professional written appraisal.
Examples:
- A painting donated by a local artist
- A used vehicle for your community program
- Specialized machinery or musical instruments
The appraiser should have knowledge of the item’s market and must not be connected to the donor or your organization.
4. Document Everything
Keep proof of how you arrived at the value—screenshots, appraisals, sale listings, or market comparisons. This is especially important in case the CRA audits your charity.
How to Calculate Fair Market Value
There’s no exact formula, but here’s a practical Canadian method:
- Find the original purchase price if possible
- Estimate depreciation or wear based on age and condition
- Check current resale values in Canadian markets
- Average those numbers to come up with a fair estimate
Example:
Your nonprofit is gifted a used treadmill. The donor paid $1,200 four years ago. After checking similar treadmills in Ontario, you find they're selling between $300 and $400 in similar condition. The fair market value is probably around $350.
How to Determine Fair Market Value for Tax Purposes in Canada
If your charity plans to issue a donation receipt for a non-cash gift, you need to determine FMV first. Here’s how:
- For items under $1,000: You can make a reasonable estimate based on research.
- For items over $1,000: Get a qualified appraiser who is independent of the donor.
Once you've determined the value:
- Issue an official donation receipt with the date, item description, and FMV
- Record the valuation method in your charity’s records
- Keep all supporting documents for at least six years, as per CRA rules
If you can’t determine fair market value, do not issue a receipt until it’s clear.
Examples Specific to Canadian Charities
Final Thoughts
Whether your organization is helping to feed families, run youth programs, or offer mental health support, it’s important to determine the fair market value when accepting non-cash gifts.
Being accurate protects your charity’s reputation, keeps you CRA-compliant, and ensures donors get fair tax receipts.
When in doubt? Ask for help from an experienced charity lawyer, accountant or appraiser who works with charities. It’s better to do it right the first time.
.png)
