Limit Set To Be Increased From $5,500 To $10,000, Effective January 1st
The Canadian government revealed on Tuesday, as part of their "Action Plan 2015", that they were seeking to increase the nation's TFSA (Tax-Free Savings Account) limit to $10,000, effective January 1st, 2015.
The TFSA program allows Canadians to earn tax-free investment income "to more easily meet lifetime savings needs." If the increase to the TFSA program becomes law (and it almost certainly will), Canadians aged 18 years and older will be able to contribute up to $10,000 per year to their TFSA and any investment gains will be tax-free, even when they are withdrawn. Canadians are able to invest in a number of different asset types in their TFSAs, including stocks, bonds and mutual funds.
The move to increase the annual limit for TFSA contributions was widely expected, though most thought that the limit would be doubled from its 2014 limit ($5,500) to $11,000. Rules allow for spouses or common-law partners to invest up to $5,500 ($10,000 if the increase goes through) in their own TFSAs as well, which means that the average Canadian household could potentially sink $20,000 into their TFSAs every year.
According to the Harper government, the increased TFSAs limits will cost the government $85 million in the current fiscal year and $360 million annually by 2019.
During a 2011 campaign stop, Prime Minister Stephen Harper promised to double the limit on TFSA contributions once his government had balanced the budget.
Before the Conservative government announced the planned increase on Tuesday, the TFSA limit had been sitting at $5,500, thanks to an provision that indexed the contribution limit to inflation.
Source: FinancialPost.com - Federal Budget 2015: Ottawa Boosts TFSA Account Limits By 82% To $10,000 a Year
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