TFSA Limits Don’t Rise (again) but CRA Thresholds Do

Sometimes the arithmetic of the rules that govern things causes things to seem a little screwed up and an example of this is found in a bulletin I got from the CRA about the TFSA limit for 2012.  The bulletin was quite simple (you can read it here), but it said:

TFSA dollar limit for 2012
With the application of the indexation increase of 2.8% for 2012 and rounding the result to the nearest $500, the TFSA dollar limit for 2012 remains at $5,000.

Simple enough, makes perfect sense, the calculation is pretty simple 2.8% of $5000 is $140, and thus it is rounded down to ZERO since it isn’t close to $500.

The problem I have with this rule is that the TFSA limit has not gone up since it was introduced because the “indexation” keeps rounding back to Zero Dollars. In fact the Indexation needs to be around 5.1% before there is even a chance for the TFSA limit to move up $500 (that would be a little more than $250 on $5000, but whether it would round UP to $500 remains to be seen).

If we assume around 2% inflation for the past 2 years or so that means if the indexation didn’t “round” to the nearest $500 the TFSA limit would be around $5200 by now, but due to the rounding rule, we are stuck at $5000.

I like the TFSA as an investment vehicle, and hope to see the program grow (or at least continue) but I would like to see this rule changed or maybe changed to round to the nearest $100? We are slipping against Inflation here, if this rate of inflation continues.

Tax Indexation Numbers

The CRA have also published the 2012 indexation fact sheet, which shows how many of the important Income tax numbers have increased. Want to see them all? Sure, here they are:

2012
($)
2011
($)
Tax bracket thresholds
Taxable income above which the 22% bracket begins 42,707 41,544
Taxable income above which the 26% bracket begins 85,414 83,088
Taxable income above which the 29% bracket begins 132,406 128,800
Amounts relating to non-refundable tax credits
Basic personal amount 10,822 10,527
Age amount 6,720 6,537
Net income threshold 33,884 32,961
Spouse or common-law partner amount (max.) 10,822 10,527
Spouse or common-law partner amount (max. if eligible for the family caregiver amount) 12,822 N/A
Amount for an eligible dependant (max.) 10,822 10,527
Amount for an eligible dependant (max. if dependant eligible for the family caregiver amount) 12,822 N/A
Amount for children under age 18 (max. per child) 2,191 2,131
Amount for children under age 18 (max. per child eligible for the family caregiver amount) 4,191 N/A
Canada employment amount (max.) 1,095 1,065
Infirm dependant amount (max. per dependant) 6,402[Footnote 1] 4,282
Net income threshold 6,420 6,076
Caregiver amount (max. per dependant) 4,402 4,282
Caregiver amount (max. per dependant eligible for thefamily caregiver amount) 6,402 N/A
Net income threshold 15,033 14,624
Disability amount 7,546 7,341
Supplement for children with disabilities (max.) 4,402 4,282
Threshold relating to allowable child care and attendant care expenses 2,578 2,508
Adoption expenses (max. per adoption) 11,440 11,128
Medical expense tax credit—3% of net income ceiling 2,109 2,052
Refundable medical expense supplement
Maximum supplement 1,119 1,089
Minimum earnings threshold 3,268 3,179
Family net income threshold 24,783 24,108
Old Age Security repayment threshold 69,562 67,668
Certain board and lodging allowances paid to players
on sports teams or members of recreation programs
Income exclusion (max. per month) 329 320
Tradesperson’s tools deduction
Threshold amount relating to cost of eligible tools 1,095 1,065
Goods and Services Tax/Harmonized Sales Tax credit
Adult maximum 260 253
Child maximum 137 133
Single supplement 137 133
Phase-in threshold for the single supplement 8,439 8,209
Family net income at which credit begins to phase out 33,884 32,961
Canada Child Tax Benefit
Base benefit 1,405 1,367
Additional benefit for third child 98 95
Family net income at which base benefit begins to phase out 42,707 41,544
National Child Benefit (NCB) supplement
First child 2,177 2,118
Second child 1,926 1,873
Third child 1,832 1,782
Family net income at which NCB supplement begins to phase out 24,863 24,183
Family net income at which NCB supplement phase-out is complete 42,707 41,544
Canada Disability Benefit (CDB)
Maximum benefit 2,575 2,504
Family net income at which CDB supplement begins to phase out 42,707 41,544
Children’s Special Allowances (CSA)
CSA Base Amount 3,582 3,485

Footnotes

[Footnote 1] Includes family caregiver amount of $2,000.

 

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