At least one of Canada’s big banks is giving clients the go-ahead to top up their Tax-Free Savings Accounts by the extra $4,500 amount specified in Tuesday’s federal budget.
CIBC Wealth’s Jamie Golombek says the Budget included draft legislation that allows for an increased TFSA dollar amount for 2015 to $10,000, up from $5,500, the current 2015 TFSA dollar amount. But critically, he added:
CIBC’s Jamie Golombek
“We have received confirmation from the Canada Revenue Agency that, while the legislation is subject to Parliamentary approval, consistent with its general approach for proposed income tax changes, it is administering the measure on the basis that $10,000 is the new TFSA annual contribution limit. Clients may therefore proceed to contribute to their TFSA based on this proposed law.”
Preamble: This is an expanded version of a blog originally posted late Wednesday. I’ve retained the original beginning after this preamble, since it concerns action we can now take with our expanded TFSAs. Or can we? As the second half of the revised blog recounts, the newspapers today are full of accounts about super sized TFSAs becoming a real political issue.
According to Tuesday’s federal budget, Canadians can now put an additional $4,500 into their Tax Free Savings Accounts (TFSAs), effective immediately. However, when I made inquiries at my friendly local financial institution, I was dissuaded from this course. You can try if you want but it’s basically at your own risk until the proposal is formally enshrined in legislation later this summer.
Jamie Golombek, CIBC Wealth
I checked with CIBC Wealth’s in-house tax guru, Jamie Golombek, who issued the following statement:
“We are awaiting a response from Finance and CRA — here is my official comment: The Budget included draft legislation that allows for an increased TFSA dollar amount for 2015 to a total of $10,000, up from $5500, the current 2015 TFSA dollar amount. On the expectation that this legislation will pass, clients may wish to contribute this additional amount to their TFSAs. In the event the legislation is not ultimately finalized, in my view, it is unlikely that the CRA would penalize taxpayers for acting on draft legislation: however, we expect CRA to comment on this over the next few days.”
Consider transfers in kind and taking a one-time tax hit
I might add that coming up with $4,500 may or may not be an issue right now, depending on whether you expect a tax refund or have to pay taxes for the looming tax filing deadline. Keep in mind that you don’t have to fund TFSAs with new cash: if you have significant non-registered investments you can “transfer them in kind” into the TFSA. Continue Reading…
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