The 2015 proposed Federal Budget was presented last week and we wanted to provide a summary of the highlights. We have attached the overview as prepared by our Tax & Estate Planning team.
There are a few specific items we wanted to highlight:
1. The Tax Free Savings Account (TFSA) annual contribution limit has been raised to $10,000, effective immediately. What this means is that if you have fully contributed to your TFSA up until now, you can immediately contribute another $4,500 on top of the $5,500 already contributed for 2015. Going forward, the annual contribution limit will be $10,000. If you would like us to top your TFSA, just send us a quick email or give us a call.
2. The RRIF minimum withdrawal amounts for Canadians age 71 and up have been reduced, effective immediately. For example, if you are 71 you would have been required to withdraw 7.38% of your RRIF under the old rules; that has now been reduced to 5.28%. The required minimum payment has been reduced for all ages from 71 – 94; minimum withdrawal amounts remain the same for ages 95 and older. If you have a RRIF – we are waiting to see how this affects your minimum payments specifically.
What this means is that Canadians ages 71-94 will not be required to withdraw as much money from their RRIFs each year, reducing their taxable income accordingly. Clearly, investors who want or need the income will want to withdraw more than the newly reduced minimum payments, but for those who do not need the income, the money can stay inside the RRIF and continue to compound tax-free. There is a provision in the budget allowing Canadians who have already withdrawn an amount higher than the newly-reduced minimums in 2015, to re-contribute the excess back to their RRIFs.
For further details on these changes and other amendments please read the attached Budget 2015: It’s All About Balance prepared by Scotiabank.