TFSAs: A Tax-Free Gift from the Government

As we approach July 1 and the Canada 150 celebrations, most Canadians who were due to receive a tax refund for the 2016 tax year would have received the funds by now. Be sure to suggest to your clients that they give themselves a big Canada Day gift by using those funds to top up their TFSA.

TFSA contribution room became available to Canadian adult residents on January 1, 2009, and has been building ever since. Effective January 2017, total contribution room available since inception reached $52,000. For four years in that period, the maximum was set at $5,000, for another four years it was $5,500 and in one year the maximum was raised to $10,000.

Contributions to a TFSA are not deductible; however, income earned within a TFSA and withdrawals made from it are not subject to tax. TFSA activity does not affect eligibility for federal income-tested benefits and tax credits, such as Old Age Security, the Guaranteed Income Supplement, the Canada Child Tax Benefit, the Working Income Tax Benefit and the Goods and Services Tax Credit.

TFSA contribution room accumulates automatically, if your clients are 17 years of age or older and a resident of Canada on the first day of the year. You can advise them that it’s a great way to build wealth while minimizing tax—a gift from the government to Canadians that we should all take full advantage of.

To learn more on how you can help your clients manage their savings, cash flow and debt reduction, consider the Debt and Cash Flow Management course. Try before you buy too by signing up for a free trial. 

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