Updates in 2023! TFSAs and FHSA
Marie-Helene Lanoix-Verreault - Feb 27, 2023
New TFSA limits for 2023
Canada Revenue Agency announced that the tax-free savings account (TFSA) limit for 2023 has increased to $6,500. An increase of $500 from year 2022. The TFSA was originally launched in 2009 starting with a yearly limit of $5,000.
Here are the amounts that could be contributed the following years:
- 2010: $5,000
- 2011: $5,000
- 2012: $5,000
- 2013: $5,500
- 2014: $5,500
- 2015: $10,000
- 2016: $5,500
- 2017: $5,500
- 2018: $5,500
- 2019: $6,000
- 2020: $6,000
- 2021: $6,000
If you haven’t used your contribution limit, it carries over to the next year. This dates to your 18th birthday. So, if you’ve never contributed to a TFSA, and turned 18 years old in 2009, your overall contribution for 2023 will be $88,000.
The idea of the TFSA is to be able to save money and never be taxed on the interest or growth you make. That is in the year it is earned or withdrawn. Did you know if you gain $50 or more in interest in a regular savings account or a non-registered investment, you’ll need to declare it on your income tax report of that year or the year withdrawn? That's why a TFSA is quite worth it!
The FHSA account to become available in 2023
In 2022, the CRA announced that the first-time home buyer savings account (FHSA) will be available in 2023. So far, the news we've heard is that it will possibly be rolled out this April. The FSRA plan offers the ability to save up to a maximum of $40,000 tax-free on a down payment for first time home buyers looking to purchase a home.
Like registered retirement savings plans (RRSP), contributions to an FHSA are tax deductible. But like a TFSA, income and gains inside an FHSA as well as withdrawals are tax-free. What's not used, is transferable to a RRSP.
The annual contribution limit is $8,000 and the policy holder must be a Canadian resident at least 18-years of age. Contribution limits not used within a year can carry-forward to the next year. The lifetime contribution is $40,000. Unlike RRSPs, contributions made within the first 60 days of a given calendar year can’t be attributed to the previous tax year.
An FHSA of an individual would cease to be an FHSA and the individual wouldn’t be permitted to open an FHSA, after December 31 the year in which the earliest of these events occurs:
- The fifteenth anniversary of the individual first opening an FHSA; or
- The individual turns 71 years old. Other rules may apply.
Do you want to add a TFSA to your financial plan or are you a first-time home buyer and want to talk about the FHSA?
Let’s have a conversation today!
Financial Planner at Sigouin Financial Group Inc.
Sources: “The Tax-Free Savings Account”: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/tax-free-savings-account.html “Design of the Tax-Free First Home Savings Account”: https://www.canada.ca/en/department-finance/news/2022/08/design-of-the-tax-free-first-home-savings-account.html