2016 TFSA Changes

Federal Finance Minister Bill Morneau confirmed Monday that the contribution limit on the tax-free savings account will drop back to $5,500 from $10,000 effective Jan. 1, 2016, but that the limit for 2015 will remain untouched. Mr. Morneau also announced that contributions will be indexed to inflation as of next year.

The Conservative government increased the annual contribution limit to $10,000 from $5,500 in the 2015 budget, but that increase has now been reversed going forward.

The TFSA currently provides up to $41,000 of cumulative contribution room to allow investment income to grow tax-free.

The rollback to $5,500 in contribution room was not unexpected in the investment community, as it was one of the key campaign promises made by Prime Minister Justin Trudeau.

(Source: BNN)

  • The $10,000 TFSA limit introduced this spring stands for the year. If you don’t contribute the full amount, it becomes part of your lifetime limit.
     
  • As of Jan.1, the limit reverts to $5,500 per year, which will be indexed, which the $10,000 wasn’t.
     
  • Morneau said indexing will allow the TFSA to retain its real value. It is set to rise in $500 increments whenever inflation erodes the value by $250.

(Source: Toronto Star)

For more information on how this might affect you, check out the CRA website, or give us a call at 778-777-2055!