Tax Tip - Money on your mind? Let's talk about savings!

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Canada Revenue Agency

Nov 13, 2024, 09:00 ET

OTTAWA, ON, Nov. 13, 2024 /CNW/ - Canada Revenue Agency

This Financial Literacy Month (FLM) we are talking about money and sharing with you ways to improve your finances through improved tax literacy. Tax know-how doesn't happen overnight, and that's okay. Every bit of knowledge you gain can have a big impact on your financial health. We're here to guide you, one step at a time.

There are several savings vehicles that can help you to save for your financial goals – like your children's education or your own retirement. Start building your strong financial future now!  

Registered Education Savings Plan (RESP) helps you save more for your children's future

Are you a parent who is thinking of how to save for your child's post-secondary education? The RESP is a long-term savings plan to help people save for a child's education after high school, including trade schools, CEGEPs, colleges, universities, and apprenticeship programs.

The best part is that anyone can open an account for a child - parents, guardians, grandparents, other relatives, and friends.

Are you an adult planning a change in career and going back to school? Save up by opening an RESP for yourself.

When you open an RESP, you can ask your financial institution to apply for benefits like the Canada Learning Bond (CLB) and the Canada Education Savings Grant (CESG). If the child is eligible, these benefits will be received in the RESP to help with the cost of the child's education. Eligible expenses can include tuition, books, tools, transportation, and rent.

Canada Learning Bond highlights:

  • provides up to a lifetime maximum of $2,000 for each eligible child from families with low income ;
  • no contributions to the RESP are needed to get the CLB;
  • beneficiary receives $500 the first year they're eligible, then another $100 each eligible year after that until the age of 15 ;
  • retroactive (you can apply for previous years, if you didn't in the past). The beneficiary can still be eligible to receive it up to the day before they turn 21.

Canada Education Savings Grant highlights:

  • provides up to a lifetime maximum of $7,200 to an RESP;
  • adds a maximum of $500 to an RESP each year, and up to another $100 for eligible families with middle- and low-income;
  • available until the end of the calendar year that the beneficiary turns 17.

To learn more about RESPs and related benefits, visit canada.ca/education-savings.

Important facts about the Tax-Free Savings Account (TFSA)

Money saved in your TFSA does not affect your eligibility for government benefits programs, such as the Canada Child Benefit or the Guaranteed Income Supplement. Here are some quick facts about TFSAs.

  • Saving or investing vehicle:  Opening a TFSA can help you grow your money tax-free. In addition to cash, you can have guaranteed investment certificates, bonds, stocks, mutual funds, ETFs and many other investments in your TFSA.
  • Tax sheltered: Any growth in the TFSA is not taxed when you withdraw the funds.
  • Contribution room: Your TFSA contribution room increases every year, regardless of your income. Every year, you may contribute up to the TFSA dollar limit plus any TFSA withdrawals or unused contribution room from previous years.
  • Multiple TFSAs: You can have more than one TFSA at any given time, but the total amount you contribute to your TFSAs cannot be more than your available TFSA contribution room for that year.
  • Carry forward contribution room: If you do not contribute in a year, the unused room can be carried forward to future years.
  • Flexibility: The flexibility of the TFSA allows you to use it for any purpose, be it for retirement or saving for your future needs such as buying a home or a car.
  • Eligibility: Unlike a typical saving or chequing account, TFSAs can only be opened once you are 18 years old and you must have a valid social insurance number.
  • Avoid getting taxed: The rules are simple: know your contribution limit and stay within it to avoid a penalty. You can calculate your contribution room using the RC343 - TFSA contribution room Worksheet. 

To learn more visit: The Tax-Free Savings Account - Canada.ca.

Saving for a home is smart - let us show you how

The First Home Savings Account (FHSA) is a registered plan that allows you to save to buy or build your first home. Some highlights: 

  • Annual limit: You can contribute, or transfer from your RRSP to your FHSA, up to $8,000 per year, with a lifetime limit of $40,000. The FHSA combines the benefits of the RRSP and TFSA, allowing you to deduct contributions from your taxable income and grow your savings tax-free.
  • Try the estimator tool: Looking to get an idea of how much you could save for a down payment for your first home? Check out the FHSA estimator. It has built-in limits to reflect the annual limit of $8,000 and the $40,000 lifetime limit.
  • Avoid contributing or transferring too much: Exceeding your annual or lifetime limit may result in a 1% tax per month on the highest excess FHSA amount in that month. Be sure to track your contributions and transfers from your RRSP to your FHSA carefully.
  • Unused FHSA participation room: If you don't use the full amount of your FHSA participation room in the year, the unused portion may be carried forward to future years, helping you maximize your savings.

To learn more, visit: First Home Savings Account – Canada.ca.

Use your Registered Retirement Savings Plan (RRSP) to buy a home

The Home Buyers' Plan (HBP) is a program that allows you to withdraw from your RRSPs to buy or build a qualifying home for yourself or for a specified disabled person. Take advantage of the increased withdrawal limit of $60,000.

You can withdraw from the HBP and the FHSA for the same home, as long as you meet all the conditions at the time of each withdrawal.

With so many benefits for taxpayers, take advantage of tax deferred savings and investing to boost your financial health! Learn more: Registered savings plans - Canada.ca

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Canada Revenue Agency
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SOURCE Canada Revenue Agency

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Canada Revenue Agency

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Government of Canada