If you are accumulating savings with a view to acquiring a first property, “CELIAPP is really the program of choice,” says Sylvain Gilbert, tax partner and regional vice-president at Raymond Chabot Grant Thornton (RCGT).
The Tax-Free Savings Account program for first-time home buyers has been in effect since April 1, 2023. You can contribute up to $8,000 per year, to a maximum of $40,000.
Your contributions are not only deductible from your taxable income, but under the roof of CELIAPP, the investment income they provide is also sheltered from tax.
When you empty the account to buy a house, the withdrawal is not taxable.
“With the RRSP, you can contribute in the first 60 days of the year 2024 to take the deduction in the 2023 declaration, but not with the CELIAPP”, underlines Natalie Hotte, practice manager, risk and knowledge management in taxation, at the Quebec Tax Training Center (CQFF, a strategic partner of RCGT since 2021).
“With CELIAPP, if we want to take the deduction in 2023, we must make our contribution in 2023,” she recalls.
The CELIAPP contribution is deductible from income. “But we are not obliged to take the deduction in 2023. It can be carried forward, like in the RRSP, ad vitam æternam,” expresses Natalie Hotte with a formula that already predisposes to midnight mass.
She adds a parable.
“If I had a choice, yes, CELIAPP first, then registered education savings plan,” continues Sylvain Gilbert.
Contributions to an RESP do not provide tax deductions, but the returns are tax-sheltered and this program remains very advantageous due to subsidies paid by the federal and Quebec governments.
A contribution of $2500 produces an immediate profit of 30%. The contribution must be made no later than December 31 to be counted in the year.
Beyond a contribution of $2,500, it is better to carry the excess over to the following year to collect grants for the new year.
February 29, 2024 is the deadline to make RRSP contributions for the 2023 tax year.
Unless you celebrated your 71st birthday in 2023. Because of this accomplishment, your RRSP contribution for 2023 must be made by December 31, 2023 (as long as your financial advisor is not already celebrating ).
The maximum contribution to a TFSA in 2023 is set at $6,500.
Since contributions are not deductible from taxable income and unused rights are accumulated from year to year, there is no urgency to contribute to your TFSA before the end of the year.
With one nuance.
An amount withdrawn from the TFSA can be transferred again the following year, without regard to the rights accumulated otherwise.
“If you have to make a withdrawal from your TFSA, it is sometimes better to do it in December rather than in January,” argues Natalie Hotte.
“If I withdraw $5,000 from my TFSA in December 2023, this right will automatically regenerate in January 2024. If I withdraw it in January 2024, I will have to wait until January 2025 to get it back. »
