In less than a month, Canada will hold its 42nd general election, and a hot political topic this year is the Tax Free Savings Account. The annual contribution limit for the TFSA was raised by the current Conservative government to $10,000, and the Liberals and New Democrats have made it clear that they want to bring the amount down to the previous limit of $5,500.
Regardless of the outcome of the election, the government is not likely to tax money currently in a TFSA, and all five of the leading parties have indicated their willingness to preserve the program. However, there is concern that the rules could change, particularly with regard to limits on annual and lifetime contributions.
Even if a new government takes the helm, contribution limits in 2015 are not likely to be affected. Legislation of that kind generally takes months or even years to pass and implement, so there is no need to run down to your bank today to maximize your tax savings.
Something else to keep in mind is that, under the current program, income in a TFSA and any money you withdraw from it do not currently affect your eligibility for certain federal benefits. Those benefits include Old Age Security, the Guaranteed Income Supplement, the Age Credit, the Canada Child Tax Benefit and the Goods and Services Tax Credit.
However, in response to questions from the Financial Post, the New Democrats indicated that, if elected, they would review the current rules to ensure that wealthy individuals are not receiving benefits that are meant to help low-income seniors.
The Liberals said they would maintain the current system with regard to Old Age Security and the Guaranteed Income Supplement. The Conservatives also support the current regime.
At Hagel Lawfirm, we understand that limiting tax exposure is a fundamental aspect of estate planning. If you have questions about your own tax situation, then don't hesitate to speak with an experienced estate planning lawyer about your full range of options for mitigating your estate's tax burden.
To learn more, please see our overview of estate planning, wills and trusts.