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Ministers Promote Canadian Tax Free Savings Accounts

by Mike Godfrey, Tax-News.com, Washington

02 January 2013


Canada's Finance and Revenue ministers have been promoting a CAD500 (USD502) increase in the cap on investments in Tax-Free Savings Accounts (TFSAs).

TFSAs were introduced by the Harper government in 2009, with approximately 8.2m Canadians opening an account by the end of 2012 and around 2.5m contributing the maximum amount last year. When the scheme was introduced, the government announced that the CAD5,000 annual contribution limit would be indexed to inflation in CAD500 increments. 2013 is the first year in which the CAD500 increment takes effect.

Any interest, dividends and capital gains earned in a TSFA are not subject to tax, and funds can be withdrawn tax-free at any time for any purpose. Unused TFSA contribution room is carried forward and accumulates for future years, but individuals can only re-contribute withdrawn amounts in the same year if they have unused TFSA contribution room.

Finance Minister Jim Flaherty said of the rise: "Our government remains committed to its low-tax plan for jobs and growth, and we are very pleased to offer Canadians this important way to save on taxes and keep more of their hard-earned money."

Revenue Minister Gail Shea added: “Through the Tax-Free Savings Account, our government is providing increased tax relief to Canadians, and encouraging savings and investment in the economy. We are pleased to see so many Canadians benefiting from the program already, and hope that more Canadians will take advantage of this important savings vehicle in 2013.”

TAGS: individuals | Finance | tax | investment | interest | banking | financial services | Canada | dividends | inflation | services

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