Deduction and taxes
TFSA: It is A tax-free savings account. This means that the investment income you make will not be taxed, but the contributions are not deductible from income tax.
TFSAAPP: Acronym for tax-free savings account for the purchase of a first property. This product is not yet offered, but should be from 1er April with Canadian trust companies, life insurance companies, banks and credit unions. “The product is attractive because, like an RRSP [régime enregistré d’épargne-retraite]contributions will be tax deductible and withdrawals for the purchase of a first home, including investment income, will be non-taxable,” explains Benoit Côté, financial planner for Gestion Financière Intégrale.
Who can open a TFSA and a TFSAAPP?
TFSA: It has been around since 2009 and is available to all residents of Canada who have a Social Insurance Number and are 18 years of age or older. Your contribution rights begin as soon as you reach this age, even if you have never opened a TFSA. “If you were born in 1991 or before and you’ve never put a cent in a TFSA, your contribution limit is $88,000 in 2023,” explains Benoit Côté.
PHOTO CATHERINE LEFEBVRE, SPECIAL COLLABORATION
Benoit Côté, financial planner for Integral Financial Management
TFSAAPP: It is intended for residents of Canada between the ages of 18 and 71. The biggest difference? “Unlike the TFSA, it is absolutely necessary to open a TFSA account for the right to contributions to be triggered. For example, if you wait three years before opening the plan, you can only contribute $8,000 and not $24,000,” explains William St-Sauveur, tax specialist and financial planner for Planica Financial Services. As its name suggests, it is used for the purchase of a first home. If you own a property or have owned it within the previous four years, you are not eligible. You are also excluded if you live with your soul mate who is an owner unless you opened your account before the cohabitation began.
Duration and different needs
TFSA: Travel, study, car, etc No matter what your savings are for, you are free to withdraw your money whenever you want, whatever the need. The product also has no time limit. “The TFSA is a flexible financial vehicle and it’s easy to access your money,” explains William St-Sauveur.
TFSAAPP: In theory, you must have the desire to acquire a first home and hold more than 10% of the shares. “To be authorized to take out your money, you will have to prove that you have a purchase or construction contract,” specifies Benoit Côté. Moreover, when withdrawing from the CELIAPP, you must have concluded the purchase or construction of the coveted property no later than the 1er October of the year following the year of withdrawal. Also, in this case, the meter is ticking since the rules impose a limit of 15 years between the opening of the account and the completion of the project. After this limit, the funds can be transferred to an RRSP without tax consequences. This means that the available RRSP space is not taken into account since the funds are in addition to the planned RRSP contribution limits.
Contribution limits
TFSA: Since 2009, the maximum contribution amount has varied from year to year. From 2009 to 2012 it was $5,000, but in 2015 it rose to $10,000, returning to $5,500 the following year and rising again to $6,500 this year.
TFSAAPP: The rule is simple, it is possible to contribute up to $8,000 annually. The lifetime limit is set at $40,000. As for unused contributions for a given year, they can be carried over to subsequent years. However, the rule regarding the number of subsequent years allowed remains to be clarified.