Ottawa bumps up TFSA limit by $500 - Financial Post

The federal government has given Canadians 500 more reasons to invest in a tax-free savings account ? namely a $500 increase in the annual contribution limit.

Canadians will be able to add the $500 starting in 2013, raising the annual maximum 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 Ted Menzies, minister of state (finance), in a statement.

?TFSAs have become an exceedingly valuable savings tool for so many Canadians.?

Since the program was announced by the Conservative, it has become a popular savings tool. Like the Registered Retirement Savings Plan, money accrues inside the TFSA with no tax. TFSA contributions do not reduce taxable income but unlike RRSPs, withdrawals are not taxed.

Based on four years of contributions, Canadians can now have made $20,000 in contributions to their TFSA. Ottawa says 8.2 million Canadians have opened an account and roughly 2.5 million Canadians contributed the maximum amount in 2011.

?We are thrilled that so many Canadians have opened tax-free savings accounts, and that the number is growing,? said Gail Shea, minister of natural revenue. ?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.?

TFSA are available to all Canadians, 18 years and older. Money can invested in variety of products like securities and mutual funds. Unused TFSA contribution room can be carried forward and accumulate for future years.

While funds can be withdrawn tax-free at any time for any purpose you can re-contribute withdrawn amounts in the same year only if you have unused TFSA contribution room.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.

It is also key to note income earned in a TFSA and withdrawals do not affect eligibility for federal income-tested benefits and credits. Contributions to a spouse?s or common-law partner?s TFSA are allowed.

The increase is consistent with a pledge from the Harper government that the $5,000 annual contribution limit would be indexed to inflation in $500 increments. Next year is the first year to be impacted.

gmarr@nationalpost.com

Find FP Personal Finance on Facebook

Source: http://business.financialpost.com/2012/11/26/ottawa-bumps-up-tfsa-limit-by-500/

ohio primary cell phone jammer g8 summit netanyahu aipac vanessa minnillo super tuesday