With the new year comes his new contribution to the Tax Free Savings Account (TFSA), the saver’s best tool. Twelve things you should know to start on the right foot.
1. Maximum contribution increases from $6,000 to $6,500 in 2024.
2. For an investor who was 18 years old in 2009, the amount of accumulated contributions now reaches $88,000.
3. As the name suggests, the amounts accumulated in a TFSA are not taxable upon withdrawal. Logically, TFSA contributions are not deductible from taxable income. “Neither investment income earned in a TFSA nor withdrawals from such an account alter entitlements to income-related state or Quebec social tax benefits and state and Quebec tax credits,” the Center Québécois de formation en taxation points out in its year-end memorandum.
4. However, the tax exemption of monies placed in a TFSA suffers from one exception: the withholding tax levied on foreign dividends.
5. All withdrawn amounts can be deposited again from the 1stah January of the following year. Financial advisor André Lacasse gives the following example on his blog. “If you deposited an amount of $81,500 in January 2022 to withdraw it in December of the same year with a value of $82,500, he writes, your new rights from January 1, 2022ah January 2023, is $82,500 + another $6,500 for a total of $89,000. »
6. Beware of excessive contributions, the tax office watches the grain. Exceedances are subject to heavy penalties of 1% per month. “Keep your records up to date, suggests André Lacasse, because it’s easy to lose track of contributions made when you have them with multiple financial institutions. »
7. Upon your death, the amounts in your TFSA can be carried over to your spouse’s TFSA without affecting the spouse’s contribution space.
8. According to a January 2022 BMO survey, 63% of Canadians have a TFSA. Only every second person knows that investments other than cash can be made there.
9. In 2019, a Quebecer who opened at least one TFSA kept an average of $24,500 in it, according to the Canada Revenue Agency.
10. To find out the amount of your contribution space, you can call 1-800-267-6999. You must have your most recent federal income tax return.
11. Products eligible for a TFSA are generally the same as for an RRSP: daily interest rate investments, mutual funds, exchange traded funds, exchange traded shares, bonds, guaranteed investment certificates (GICs), annuity or insurance contracts, precious metals metals etc
12. The TFSA is versatile. It can be used as a financial cushion for emergencies, to finance a special project such as a trip abroad, but also for retirement planning in addition to an RRSP. For example, Mr. Lacasse suggests living off his TFSA while deferring the Quebec Pension Plan (QPP) pension and Old Age Security Pension (PSV) by a year to improve them, which is not negligible given that these pensions are indexed .
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