Clarifying Federal Government changes to the TFSA annual contribution limit.
It’s official. The $10,000 TFSA limit is rolling back to $5,500. The change is effective January 1, 2016. The legislation states that the limit for 2015 is staying at $10,000. Remember, the TFSA contribution room automatically carries forward annually. Therefore, if you are unable to contribute the full $10,000 now, you can add the unused contribution limit to your contributions for 2016 or later years. As of 2016, the cumulative TFSA limit for people eligible to contribute since 2009 will be $46,500.
If taxpayers have the money to contribute, they should deposit it into a TFSA as soon as possible to take advantage of the tax benefits. The Department of Finance announcement on December 7, also stated that annual TFSA limit indexing, which was eliminated earlier this year, will return. The TFSA limit will be rounded to the nearest multiple of $500, and if the amount is “equidistant from two such consecutive multiples,” the limit will be rounded to the higher multiple of $500.
There are options for individuals mourning the lost wanting to maximize tax benefits for 2016 and years forward. In addition to maximizing RRSPs, taxpayers with children could put savings into RESPs. They could receive the Canada Education Savings Grant on contributions up to $2,500 a year, and there are tax deferral benefits.”
Other options include investing in permanent Universal Life or Whole Life insurance policies to achieve further tax sheltering. For more information about TFSAs or maximizing tax benefits, please contact our office. One of our professional advisors will be happy to meet with you to discuss all of your options.