To TFSA or to not TFSA...that is the question
Robert Gauvreau, FCPA, FCA
I help high performance business owners realize their financial dreams through confidence in numbers. Think of me as your personal trainer for financial results except I do the workout and you get the six pack.
As we continue to move through the 2018 personal tax season, I have seen a reoccurring theme that I wanted to share which may help save you on personal taxes...and here it goes:
If you have investment income on your personal tax return (interest, dividends or capital gains), and you have not maxed out your Tax Free Savings Account (TFSA), then there is an opportunity to eliminate this investment income as being taxable.
A Tax Free Savings Account (TFSA) allows an individual to invest funds that they have personally into a 'sheltered' program, allowing them to not pay tax on the investment income. As the name suggests, this investment income becomes 'tax free'.
So...if you are paying tax on this income, it is advisable that you shift these investments from 'non-registered' into your 'Tax Free Savings Account'. Generally, you can continue to invest in the same mutual funds, stocks, GIC's etc., but now the income generated is not taxable to you.
Another important piece of information related to the TFSA is that when you put funds into the registered account, you do not get an upfront deduction (as you would with an RRSP contribution), however, when you eventually pull the funds out, you do not pay tax on that withdrawal either.
It is important to know also, that you can't lose your TFSA contribution room. If you have never opened a TFSA, you can contribute up to $63,500 today: $5,000 for each year from 2009 to 2012; $5,500 for each of 2013 and 2014; $10,000 for 2015; $5,500 for each of 2016, 2017 and 2018; and $6,000 for 2019.
So...if you have investment income reported on your personal tax return and you have not maxed out your TFSA, now is the time to do so to save income tax on this investment income for 2019.
Hopefully you found this update valuable. Should you feel that you need further information related to any of the above noted items, please feel free to email me at bgauvreau@gauvreaucpa.ca or click on the link below to book a time to review any questions or concerns you may have.
https://www.scheduleyou.in/HCPaabiR