TFSA Limit 2012 for BC - $5000
What is a TFSA?
Saving money for the future is not an easy thing, especially if there are needs and wants to consume discretionary money. Tax Free Savings Accounts (TFSAs) are one of the methods that have been introduced to help us save our money. TFSA’s are available to all Canadians over the age of 18 with a Social Insurance Number.
TFSAs offer tax benefits (or tax exempt growth) as an incentive to you for saving. Because of the tax exempt status annual contributions are limited. If the cap (maximum contribution) is exceeded, the owner of the account is penalized. Regardless of limits and other applicable rules, TFSAs are a great way to save money, without the burden taxes on your investment gains.
Canadians can invest a maximum amount of $5000 annually. Contribution can be invested in in the same types of ways as an RRSP (GIC’s, GIA’s, Term Deposits, Segregated Funds, Bond Portfolio’s Equities, etc.). Funds can be withdrawn from a TFSA at any time with no tax payable on any investment earnings. (*nor is there a deduction for investment losses*)
A common misconception is that a TFSA’s limit is $5000. A Tax Free Savings Account can actually more than $5000 because of accumulated prior year contributions. But the maximum yearly contribution is $5000 with any excess resulting in an “over contribution penalty”.
For example:
- Susan deposits $5000 in January 2011. In February 2011, she withdraws $5000. The resulting TFSA balance is $0. Susan may not make another deposit until the next calendar year, or next January 2012. Even though the balance is $0, she has already totaled $5000 in annual contributions. Susan will have to wait until January 2012 to recover her unused $5000 from 2011 plus her new room of $5000 for the year.
- As of January 2011 all Canadian have $15,000 of eligible TFSA room ( $5000/yr x 3 years = $15,000). In January 2012 the annual limit will remain at $5000/yr and if you have not ever contributed you will have $20,000 of eligible TFSA contribution room.
The function of a tax free savings account is to encourage Canadians to save by providing tax benefits. If you would like to meet with a professional advisor to discuss your portfolio and the differences between TFSAs and RRSPs (registered retirement savings plans) please contact us for a free consultation and review of your individual situation.
We are independent financial services brokers in the Greater Vancouver area – this means we have access to the majority of top level fund managers in the country and will not push you into a “house brand” fund or GIC.
Our commitment to you is finding the right fit for your individual situation and risk tolerance. Contact us today and speak with a Vancouver Area financial advisor.
Shelter Bay Financial 1.604.832.2029
