THUNDER BAY – Business News – Are your personal and businnes savings enough? The federal government has unveiled new updates to the Tax-Free Savings Account program. “Our Government remains committed to its low-tax plan for jobs and growth, and we are very pleased to offer Canadians this important way to save on taxes and keep more of their hard-earned money,” said Finance Minister Flaherty.
Since the federal government made the Tax-Free Saving Accounts program available in 2009, Canadians have been able to earn tax-free investment income on contributions of up to $5,000 per year—a limit that will increase to $5,500 as of 2013.
Minister Flaherty states, “All Canadians—from students to young families to seniors—can earn tax-free income through a range of investment products. TFSAs have become increasingly popular, with approximately 8.2 million Canadians having opened an account and roughly 2.5 million Canadians contributing the maximum amount in 2011”.
“Through the Tax-Free Savings Account, our Government is providing increased tax relief to Canadians, and encouraging savings and investment in the economy,” said Minister Shea. “We are pleased to see so many Canadians benefiting from the program already, and hope that more Canadians will take advantage of this important savings vehicle in 2013.”
The TFSA is a flexible, registered, general-purpose savings vehicle that allows Canadians to earn tax-free investment income. A TFSA can contain a range of investments, similar to those in a Registered Retirement Savings Plan, such as mutual funds, listed securities and guaranteed investment certificates.
Key features of the Tax-Free Savings Account to keep in mind:
- A TFSA is available to all Canadians, 18 years and older;
- Any interest, dividends and capital gains earned in a TSFA are not subject to tax;
- Unused TFSA contribution room is carried forward and accumulates for future years;
- Funds available in your TFSA can be withdrawn tax-free at any time for any purpose. You can re-contribute withdrawn amounts in the same year only if you have unused TFSA contribution room. Otherwise, you have to wait until the following year;
- Income earned in a TFSA and withdrawals do not affect your eligibility for federal income-tested benefits and credits;
- Funds can be given to a spouse or common-law partner for them to invest in their TFSA; and
- TFSA assets can generally be transferred to a spouse or common-law partner upon death.
When the TFSA was introduced, the federal government announced that the $5,000 annual contribution limit would be indexed to inflation in $500 increments. 2013 will be the year in which the first $500 increment takes effect, which means more room for Canadians to put funds aside for their financial goals.
For more information on TFSAs, please visit the Canada Revenue Agency website or contact your financial institution.