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The Honourable Ted Menzies, Minister of State (Finance), and the Honourable Gail Shea, Minister of National Revenue, today announced that Canadians will be able to save an additional $500 in their Tax-Free Savings Account (TFSA) starting in 2013, raising the annual contribution limit to $5,500.
“Our Government remains committed to our low-tax plan for jobs and growth and we are very pleased to offer Canadians ways to save on taxes and keep more of their hard-earned money,” said Minister Menzies. “TFSAs have become an exceedingly valuable savings tool for so many Canadians.”
Since the Harper Government made TFSAs available in 2009, Canadians have been able to earn tax-free investment income on contributions of up to $5,000 per year. 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.
“We are thrilled that so many Canadians have opened Tax-Free Savings Accounts, and that the number is growing,” added Minister Shea. “Our Government is committed to helping Canadians keep more of their hard-earned dollars, and the TFSA offers yet another opportunity for Canadians to benefit from increased tax savings.”
The Ministers highlighted key features of the TFSA that make it a popular savings vehicle for Canadians:
- A TFSA is available to all Canadians, 18 years and older;
- Any interest, dividends and capital gains earned in a TFSA are not subject to tax;
- A TFSA allows you to invest in a number of types of investments, be it a high-interest savings account, mutual funds, guaranteed investment certificates, listed securities, or other types of qualified investment products;
- 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- Funds available in your TFSA can be withdrawn tax-free at any time for any purpose. You can re-contribute withdrawn amounts in the same year only if you have unused TFSA contribution room.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; and
- Contributions to a spouse’s or common-law partner’s TFSA are allowed.
“We believe in the TFSA as a savings vehicle,” said Joel Lalonde, Executive Vice-President of Your Credit Union.
“Our member owners have been waiting for this increase and will take advantage of it.”
When the TFSA was introduced, the Harper 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.
“We encourage all Canadians to take advantage of TFSAs as a valuable way to save for the future and to save on their taxes,” said Minister Menzies.
To help Canadians take full advantage of this savings vehicle, the Canada Revenue Agency has up-to-date and comprehensive information regarding TFSAs on its website.
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