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 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, it 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 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. 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 two 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 may be changed to round to the nearest $100? We are slipping against Inflation here if this rate of Inflation continues.
Tax Indexation Numbers
The CRA has also published the indexation fact sheet, which shows how many critical Income tax numbers have increased. Want to see them all? Sure, here they are:
| 2012 ($) | 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 |
| The amount for an eligible dependant (max.) | 10,822 | 10,527 |
| The amount for an eligible dependant (max. if dependant eligible for the family caregiver amount) | 12,822 | N/A |
| The amount for children under age 18 (max. per child) | 2,191 | 2,131 |
| The 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 the family 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 |
| The family net income threshold | 24,783 | 24,108 |
| Old Age Security repayment threshold | 69,562 | 67,668 |
| Specific 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 the 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 |
| The 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 |
| An additional benefit for a 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 |
The indexing is cumulative.
2009 limit is $5,000
2010 indexing factor is 0.6 per cent. ($5,030)
2011 indexing factor is 1.4 per cent. ($5,100)
2012 indexing factor is 2.8 per cent. ($5,243)
2013 indexing factor is unknown but barring zero change to the index the TFSA dollar limit will be $5,500 even though the real figure will likely be less than that.