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Finance Bumps Up 2013 TFSA Annual Contribution Limit By $500 - by Ryan Hoag and Daniel Yee 

Canadian Tax Adviser

 

November 27, 2012

 

Ryan Hoag
Vancouver, Enterprise Tax

 

Daniel Yee
Toronto, Canadian Corporate Tax

 

Finance has announced the annual contribution limit for Tax-Free Savings Accounts (TFSA) will increase to $5,500 (from $5,000) starting in 2013. When the TFSA was introduced, the 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.

Legislative background
The 2008 federal budget introduced the TFSA, a new registered savings account. Starting in 2009, Canadian resident individuals age 18 and over were eligible to contribute up to $5,000 annually into their TFSA. Contributions to a TFSA and interest on money borrowed to invest in a TFSA are not deductible for income tax purposes, however, the income generated in such an account (for example, investment income and capital gains) is tax-free, even when it is withdrawn.

 

According to Finance, the $5,000 annual contribution limit is indexed to inflation using the Consumer Price Index (CPI) data as reported by Statistics Canada, rounded to the nearest $500. For 2013, the unrounded indexed amount moved beyond the $5,250 threshold for the first time, so the annual contribution limit increases to $5,500.

 

For more information, contact your KPMG adviser.

 

 

 

 

Information is current to November 27, 2012. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG’s National Tax Centre at 416.777.8500.

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