Actualis - Economy, Personal finance, Financial security
November 2018

Don't miss this date: December 15

Tax instalments due

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The TFSA is turning 10
… and the contribution limit just rose to $6,000. It’s the perfect time to take a fresh look at the features of this tax-efficient investment vehicle that Canadians are using more than ever.

In March 2008, when the federal finance minister at that time, the late Jim Flaherty, tabled his budget, it included a surprise for Canadian taxpayers: effective the following year, there would be a new vehicle for sheltering their savings from taxes: the TFSA, or tax-free savings account.

Ten years later, statistics show that the TFSA is both very popular and still under-used.

 

Two pie charts show that there were 13,473,200 TFSA holders in Canada in 2016. However, 41.9% did not make a TFSA contribution and only 10.32% maximized their contributions. These figures come from Statistics Canada.

The TFSA in 5 points

But what exactly is a TFSA? Here is a five-point summary.

 

Table summarizing the five main differences between the TFSA and the RRSP. The first point is eligibility. For the TFSA, you must be a citizen aged 18 or over. For the RRSP, you must have earned income. The second point gives contribution limits. The limit for the TFSA is $6,000 as of 2019, and for the RRSP is 18% of the previous year’s earned income. The third point shows that contribution room can be carried forward from year to year in both cases. The fourth point notes whether contributions are deductible. No for the TFSA; yes for the RRSP. The fifth and last point looks at whether withdrawals are taxable. No for the TFSA; yes for the RRSP.

 

Table showing the annual TFSA contribution room. From 2009 to 2012, it was $5,000. In 2012 and 2013, it was $5,500. In 2015, it was $10,000. From 2016 to 2018, it was back down to $5,500. Finally, for 2019, it is $6,000.

Strategies for leveraging TFSA use

To round out this overview and obtain personalized advice about using the TFSA, consult your mutual fund representative or financial security advisor.

 

The following sources were used to prepare this article:

Actualis,Federal Budget: The new TFSA… and the rest”, March 2008.
Calcul Conversion,RRSP contribution limit calculator for 2019 on 2018 income”.
Government of Canada,Tax-Free Savings Account statistics”, 2018 ; “The Tax-Free Savings Account” ; “TFSA: Contributions” ; “Contributions, withdrawals and transfers” ;
Les affaires,REER ou CELI ? Conseils et astuces”.
Question Retraite, Cotiser à un REER ou à un CELI ?” ; “Régime enregistré d’épargne-études (REEE)”.