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 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