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You may be wondering whether to contribute more to your TFSA following the tabling of the federal budget on April 21, 2015. The budget substantially raised the annual TFSA contribution limit, from $5,500 to $10,000 in 2015.

This is good news for taxpayers, who will be able to grow more of their savings tax-free. According to current indexing projections, it would have taken close to 30 years to reach the $10,000 contribution level.

If you hold a TFSA, you can make the new maximum contribution this year.

Assurance from the Canada Revenue Agency

Although the proposed federal budget is still subject to parliamentary approval, the Canada Revenue Agency announced that individual taxpayers can take advantage of the new annual TFSA contribution limit immediately, with no penalty in the event that the proposed budget is not passed for any reason. If you have already made your $5,500 contribution for 2015, you can now contribute an additional $4,500; if you have not yet made your TFSA contribution, you can optimize your tax-free savings now by contributing the $10,000 maximum.

The table below shows the long-term benefits of making the maximum annual contribution to your TFSA.


* Based on a taxable rate of return of 5% and a taxation rate of 49.97%. We have assumed contributions over a 25-year period with the new annual $10,000 limit. The difference of more than $150,000 ($501,135 – $350,190) is derived solely from the yearly TFSA tax savings.

Non-indexing of contributions

You should also know that the annual contribution limit will longer be indexed to inflation. It is now a fixed annual amount that will remain in effect for an indeterminate period.

To obtain more details, or if you are ready to maximize your contribution, contact your Wealth Management Advisor.

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