It’s TFSA time again!
If you’ve been rattled by the markets recently, you’re not alone. 2016 has seen one of the worst openings in history for equities around the world. And when you add in the declining dollar and the collapse in oil prices, it has been an especially brutal January for Canadian investors.
Nonetheless, there’s hope amidst the carnage, as dips in the market can become buying opportunities. But more than anything else, there’s always your good old TFSA…
With TFSAs, any time’s the right time
Every January 1, you get new room for contributing to your TFSA. This year brings an additional $5,500. Even though this is not as good as the $10,000 we saw in 2015, it still represents a great way for Canadians to increase their savings while having to pay less taxes. And of course, you can add this to whatever unused contribution room you carried over from previous years. Knowing how much you can contribute this year is as easy as contacting the Canada Revenue Agency and asking them. Or, if you already have your history to hand, you can figure it out by following this basic formula:
- The total contribution that you could have made since TFSAs started in 2009 is now at $46,500
- Subtract whatever amount you have contributed in previous years
- Add whatever amount you withdrew in previous years
And voilà, you have your total unused contribution room.
If you’ve contributed the maximum amount every year up until now, then you’ll only have the 2016 limit of $5,500 available to you. But if you haven’t, then you can add more than this to your account.
We strongly recommend that you do. TFSAs are a windfall for Canadians investing and saving for retirement, because every single penny that you earn within them—from dividends to capital gains to interest—is tax-free.
Markets will go up and down, but taxes will always be with us, and TFSAs lessen their impact. In today’s jittery markets, that’s something to be thankful for.
Speaking of taxes…
Just as we do our part to help you reduce your taxes, we also do our best to make it easy to pay them. Your 2015 taxes are due by April 30, 2016, and we’re busy at work preparing the forms you’ll need. Our mailing schedule for tax receipts is as follows:
|2015 RSP Contribution Receipts||February 1|
|T4 RIF (Statement of Income from a Retirement Income Fund)||February 1|
|T4 RSP (Statement of Retirement Savings Plan Income)||February 2|
|T5 (Statement of Investment Income)||February 10|
|T4A TFSA (Retirement and Annuity Income)||February 12|
|NR4 Interest (Statement of Amounts Paid or Credited to Non-Residents of Canada)||February 13|
|NR4 RSP & RIF (Statement of Income from a Retirement Income Fund)||February 13|
|RL3 (Investment Income)||February 15|
|RL2 (Retirement and Annuity Income)||February 15|
|2016 RSP Contribution Receipts (First 60 Days)||March 14|
You can expect to receive your receipts within a week or so after the mailing dates indicated above.
Please also note that annual statements for registered GICs were already mailed out on January 15, and statements for non-registered GICs will be mailed by the end of January.
Interest of less than $50?
Another thing to be aware of is that tax receipts are no longer being issued for interest amounts under $50. But for those who did earn interest of $50 or more on any investment during 2015, you can expect to receive a T5 statement (and Relevé 3 if you’re a resident of Quebec). This will show the interest paid on the balance of any GIC or savings account, as well as interest accrued but not yet received on compound instruments such as GICs.
Seniors can still split income—twice!
As we noted in a previous Oaken Update, the ability to split income for families is something that surfaced last year, but is already headed for elimination under the new Trudeau government. This measure was intended to allow a higher-earning spouse in a family with dependants under 18 to transfer up to $50,000 to the lower-earning spouse. The latter would still have paid tax on that amount, but likely at a lower rate, which would have enabled families to save up to $2,000 on their tax bill.
Nonetheless, there are still opportunities for income splitting that may be relevant to you. Firstly, you are allowed to split eligible pension income with a partner if you meet the following criteria:
- You and your spouse/common-law partner are residents of Canada and living together
- You received pension income that is eligible for the pension income tax credit
With this kind of income splitting, you can allocate up to 50% of eligible pension income to your spouse/partner. Note that there’s no need to actually transfer money from one person to the other. The “transfer” is simply recorded by filing the Canada Revenue Agency form “T1032—Joint election for pension splitting”.
Secondly, you can split income in retirement by contributing to a spousal RSP now. This makes sense if you’ll have a higher income or more assets than your partner when you retire. When the time comes to withdraw funds, they’ll be taxed in the partner’s lower income tax bracket.
Drop by our stores, and win!
Customers and friends will always receive a warm welcome when visiting us. We especially encourage you to drop by our stores in Toronto or Calgary for a coffee and a chat about your financial future.
And let’s not forget our quarterly draws too. Every 3 months we draw a name from among the many visitors who come to our stores and enter their contact details, and this past quarter was no exception. So congratulations to George Chan of Toronto, ON, our in-store winner for the last quarter of 2015. George picks up an Oaken GIC for $500, a great way to round out the year!
Of course, there are other opportunities to win if you can’t drop by. For example, you can visit us at the Vancouver ZoomerShow that’s coming up on March 19 & 20, or at some of the other events we’ll be attending throughout the year. Stay tuned to Oaken Update for more details!
Readings for 2016, and beyond
To help you get a good start on your financial planning, we’ve included some tips about what you should be thinking about in the coming months.
- Jamie Golombek of the Financial Post provides a great checklist of things you should be doing to achieve tax efficiency in 2016 and beyond.
- A reminder from the Oaken Blog about healthcare as you age, and the likelihood that future governments will not be able to cover all your costs.
- Another post from the Oaken Blog that discusses the pros and cons of annuities, an option that can provide a steady income in retirement.