Ottawa, Ontario – The Honourable Kerry-Lynne D. Findlay, P.C., Q.C., M.P., Minister of National Revenue, and the Honourable Joe Oliver, Minister of Finance, are advising Canadians that the Canada Revenue Agency (CRA) is allowing individuals to immediately benefit from the proposed increase to the Tax-Free Savings Account (TFSA) annual contribution limit announced in Economic Action Plan 2015.
Economic Action Plan 2015 proposes to increase the TFSA annual contribution limit from $5,500 to $10,000, effective January 1, 2015. Canadians can immediately start contributing to their TFSA up to the proposed $10,000 annual contribution limit.
This proposed measure is subject to parliamentary approval. Consistent with its standard practice, the CRA is administering this measure on the basis of the Budget announcement. Financial institutions may immediately allow existing and new account holders to contribute up to the proposed maximum. The CRA will continue to work with financial institutions to ensure a smooth implementation of this new proposed measure.
The TFSA is a popular means of saving for Canadians at all income levels. Individuals with annual incomes of less than $80,000 accounted for more than 80 per cent of all TFSA holders and about 75 per cent of TFSA assets as of the end of 2013. About half of TFSA holders had annual incomes of less than $42,000.
- TFSAs have proven to be popular. More than 10.7 million Canadians had opened a TFSA by the end of 2013.
- The TFSA first became available in 2009. It allows Canadian residents, aged 18 or older and who have a valid social insurance number, to earn tax-free investment income throughout their lifetime.
- Contributions to a TFSA are not deductible for income tax purposes, but investment income earned in a TFSA and withdrawals from it are tax-free.
- The TFSA provides greater savings incentives for low-and modest-income individuals because, in addition to tax savings, neither the income earned in a TFSA nor withdrawals from it affect eligibility for federal income-tested benefits and credits, such as the Canada Child Tax Benefit, the Goods and Services Tax/Harmonized Sales Tax Credit, the Age Credit, and Old Age Security and Guaranteed Income Supplement benefits.
- Canadians can track their annual TFSA contribution limit easily using the CRA’s My Account secure online self-service portal.
- TFSAs are an important savings tool for Canadians. Budget 2015 clearly states 60 per cent of the individuals contributing the maximum amount to their TFSAs had incomes of less than $60,000 in 2013.
- Forty-six per cent of individuals who have maxed out their TFSAs were seniors and over 70 per cent were aged 55 or over.
Source Canada Revenue Agency