By Scott Ronalds
Investors received clarity this week on limits surrounding contributions to Tax-free Savings Accounts (TFSAs).
Earlier this year, the Conservative government increased the annual contribution limit to $10,000. The Liberal government confirmed on Monday, however, that it will be rolled back to $5,500 in 2016. Going forward, the limit will be indexed to inflation, as it was prior to this year’s increase.
The $10,000 limit for 2015 will remain in place indefinitely, and eligible investors who do not make the maximum contribution this year can carry over any unused contribution room, as is the case for previous years.
Here’s a summary of how the numbers break down:
Presently, eligible investors have $41,000 in lifetime contribution room.
- The $10,000 limit for 2015 will remain in place for the current year, and can be carried forward indefinitely if not used by year-end.
- Next year (effective Jan 1st) eligible investors can contribute a maximum of $5,500, bringing the cumulative limit to $46,500.
- Beyond 2016, the annual limit will be indexed to inflation (in increments of $500).
TFSAs are a great investment vehicle and we encourage all eligible investors to take advantage of them. If you have any questions on these accounts or contribution limits, don’t hesitate to contact us at 1-888-888-3147.1