TAKE ADVANTAGE OF THE NEWLY INCREASED TFSA CONTRIBUTION LIMIT OF $10,000
The recently introduced Federal Budget for 2015 includes an increase to the Tax-Free Savings Account (TFSA) contribution limit from $5,500 to $10,000 per year. The Canada Revenue Agency is allowing this new change to be effective immediately – prior to the regular process of the Budget passing through Parliament and before receiving Royal Assent. In addition, the TFSA annual contribution limit will no longer be indexed to inflation annually. A TFSA is a flexible savings vehicle that allows Canadians to save for short and long term goals while earning tax free investment income and growth. Furthermore, all income and withdrawals from a TFSA are generally tax free.
Overview of the Tax-Free Savings Account
- Available for Canadian residents, 18 years of age and older
- Contributions are not tax deductible
- Unused contributions may be carried forward
- Investment income earned is tax free
- Withdrawals are tax free
- Amount of withdrawal in one year can be re-contributed in future years.
- Wide range of investment options with certain restrictions on prohibited and non-qualified investments
- Income earned and withdrawals do not affect eligibility for federal income-tested benefits and credits
- Attribution does not apply where funds are given to a spouse to invest in their TFSA
- TFSA of a deceased spouse can generally be transferred to a surviving spouse’s TFSA
Other savings vehicles, such as Registered Retirement Savings Plans (RRSPs) and Registered Education Savings Plans (RESPs) are geared to specific savings goals during your lifetime; a comfortable retirement and education planning for your children.
TFSAs, however, have no specific goal in mind. This provides Canadians with an effective savings plan for emergency funds, vacation planning, major purchases, and long term estate goals.
Your financial plan should coordinate annual contributions to a TFSA alongside planned savings in registered plans depending on your personal situation. This will ensure that you maximize the benefits of each registered savings plan to meet your goals.
For more information or to receive our complimentary article on Tax Free Savings Accounts, please contact your Richardson GMP Investment Advisor.