“Savings, remember, is the prerequisite of investment” ― Campbell McConnell
Annual Tax-Free Savings Account Limit Increases to $6,000 for 2019
The annual TFSA increase rose from $5,500 in 2018 to $6,000 for 2019. You might be asking, “why the increase?”. The answer is that the annual dollar limit increase is tied to inflation and rounded to the nearest $500. The CRA’s indexation for 2019 is 2.2%.
As of January 1, 2019, the lifetime contribution limit for someone who has never contributed to the TFSA and has been eligible since its 2009 introduction will be $63,500.
Calculating your own TFSA space can be achieved by the following:
Unused TFSA Contribution Room To-Date + Total Withdrawals Made in the Current Calendar Year + Next Year’s TFSA Limit = TFSA Contribution Room at the Beginning of Next Year.
For example, consider the case of Jane, who was eligible for the TFSA since its introduction in 2009. Her TFSA Contribution Room on January 1, 2018 was $45,000. Jane withdrew $15,000 from her TFSA in March of 2018 and made no contributions in 2018.
Her 2019 Contribution Space will be: $45,000 + $15,000 + $6,000 = $66,000
Had Jane made no withdrawals in 2018, her 2019 Contribution Space would be: $45,000 + $6,000 = $51,000.
It is important to remember that when withdrawing money from the TFSA, that amount of room is “frozen” until the following January 1. So, a person who has maximized their TFSA space and makes a withdrawal during the year cannot contribute that same amount during the same year.
For example, John maximized his TFSA through 2018, a combined $57,500 of contributions lifetime. He withdraws $10,000 from the TFSA in March of 2018. His TFSA space remains $0. The $10,000 he withdrew will “re-open” in 2019, along with his new space. If he contributes the $10,000 back into the TFSA in 2018, he will be considered to have over-contributed. The penalty for over-contributions is 1% of the over-contribution per month. This is a steep penalty!
If you have questions about your TFSA Contribution Room, let us know!
Essential 2019 Tax Numbers
Here is a list of some important numbers for tax purposes:
- Basic Personal Amount: This is $12,069 in 2019, up from $11,809 2018.
- Maximum RRSP Contribution Room: You can generate up to $26,500 in RRSP Room for 2019, up from $26,230 in 2018
- TFSA Limit: As mentioned above, the 2019 amount is $6,000, up from $5,500 in 2018.
- Maximum Pensionable Earnings: $57,400 in 2019, up from $55,900 in 2018. The basic exemption amount of $3,500 from 2018 will also apply in 2019.
- Maximum EI Insurable Earnings: The Federal amount is $53,100 for 2019, up from $51,700 in 2018.
- Lifetime Capital Gains Exemption: The LCGE is $866,912 in 2019, up from $848,252 in 2018.
- Home Buyer’s Amount: Did you buy a home? You may be eligible for the Home Buyer’s Amount, a $5,000 claim which generates a non-refundable tax credit of $750.
- Medical Expenses Threshold: For 2019, the maximum threshold is 3% of net income or $2,352 (whichever is lower). For 2018, the threshold is 3% of net income or $2,302 (whichever is lower).
The following figures could affect taxpayers aged 65 or older (as of December 31st of the Tax Year):
- Age Amount: The maximum claim amount for 2019 is $7,494, up from 2018’s maximum of $7,333.
- Pension Income Amount: Clients may be able to claim up to $2,000 if they reported eligible pension, superannuation or annuity payments.
- OAS Clawback Threshold: For 2019, the taxpayer’s net world income exceeding $77,580 may result in repaying some or all of their OAS pension. In 2018, the threshold is $75,910.
Let us know if you have any questions about these updated figures.
Sources: Advisor.ca, AdvisorEdge
This information is provided for general information purposes only. It does not constitute professional advice. Please contact a professional about your specific needs before taking any action.