About 20 years ago, when I used to prepare taxes for fellow students and low income friends, they were always astonished by the amount of taxes we pay to the government.
Many times, when people saw the money taken out of their paycheck they would ask me: “How can I pay less taxes?”
This is the question the plagues the mind of most tax-payers: How to pay less taxes.
Fortunately there is one way: To earn more money from investment than from a paycheck. And once we are earning money from investments, how to reduce the tax bill even lower.
Well, the government tax us heavily, but it also offer us a few opportunities to reduce our tax bill by incentivizing us to save for our future regiments.
Two of those incentives are RRSP (Registered Retirement Savings Plan) and TFSA (Tax Free Savings Account).
Today we will speak a bit about TFSA.
TFSA is a registered account where a person can make investments and whichever gain they make in that account, whether it’s capital gain, interest revenue, or dividend, those gains are 100% tax free.
What’s the catch? you may ask.
The catch is that there are some limitations on the amount of money we can put in our TFSA. The TFSA account is supposed to be a way for lower and middle income families to be able to put some savings aside tax free. It’s not supposed to be for the rich to hide even more of their earning.
So, every year, the government tell us how much money we are allowed to put in our TFSA.
It seems that for this coming year, 2023, the limit will be $6,500, up from $6,000 this year.
That means the total contribution room available in 2023 for someone who has never contributed and has been eligible for the TFSA since its introduction in 2009 is set to be $88,000.
I don’t know how to emphasize this enough. But putting money in this account should be a priority for any person in Canada.