Business & Investment

TFSA: How Ordinary Canadians Protected $ 298 Billion from CRA Taxes

Thanks to TFSA, ordinary Canadians have been able to protect $ 298 billion in assets from the Canada Revenue Agency (CRA).

It recently said Financial post Article by Jamie Golumbek — a CIBC Executive — Reviewed a number of new data from CRA. Golumbek has revealed this information:

  • Currently, Canada has 20,779,500 TFSAs.
  • They are held by 14,691,000 unique account holders.
  • Their average account value was $ 20,300.
  • The average TFSA holder donated $ 7,811 in 2018. That’s more than $ 5,500 in additional space that year.

These are fascinating statistics. They show that Canadians are actively using TFSA and contributing to a fair share. It’s already interesting enough.But what’s really interesting The amount of tax they can save..

$ 298 billion tax savings

To understand how much money Canadians can save in total with TFSA, you need to find out how much they have invested.

Thanks to the CRA data dump and Golumbek’s article, we Total is $ 298 billion.. Here are some possible returns that money can generate:

  • Dividend of $ 8.9 million with a weighted average yield of 3%.
  • 10% capital gains of $ 29.8 billion.

To estimate Actually All these tax savings are not possible. Not all Canadians have the same yields in their portfolios, they do not have the same tax rates, nor do they achieve the same capital gains. But we know this:

  • Outside of the TFSA, these Canadians will pay taxes on dividends and capital gains.
  • Inside the TFSA, they aren’t paying anything.

Given that the 3% yield used in the above hypothesis is fairly conservative (in the case of Canadian equities), it is reasonable to assume that the Canadian TFSA receives a total annual dividend of $ 500-9 billion. It’s not unreasonable. With a tax rate of $ 9 billion and 20% on non-TFSA dividends, that’s $ 1.8 billion in national tax savings.

An easy way to get a piece of pie

If you want to take part in the TFSA tax-saving jackpot, it’s wise to start right away. The sooner you start, the more you can enjoy tax-free compound interest. But it’s not as easy as opening an account. To get the most out of TFSA, you need to make a taxable investment. Otherwise, your account will be wasted.

If you are new to investing, you can consider index funds such as: iShares S & P / TSX60 Index Fund (TSX: XIU)..Is a very popular fund run by Black rock, The most popular ETF company in the world. XIU boasts a yield of 2.9%, significant diversification, and a commission of only 0.18%. Fees are almost unnoticed, so investing $ 500,000 will yield a yield of $ 14,500 each year. Using a fund like XIU is one of the safest ways to get started, as it incorporates risk-reducing diversification.

If you want a slightly higher yield, you can consider utility stocks such as: Fortis (TSX: FTS)(NYSE: FTS).. Utilities are one of the safest individual shares you can own because they are protected and regulated by the government. Investors are usually encouraged to invest in funds, but good utilities like Fortis should be run without much hassle. In the meantime, you will be paid a dividend yield of 4%, which can be collected tax-free by TFSA. Talk about sweet deals!

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Stupid contributor Andrew Button I own a stake in iSHARES SP TSX 60 INDEX FUND. Motley Fool recommends FORTIS INC.

TFSA: How Ordinary Canadians Protected $ 298 Billion from CRA Taxes TFSA: How Ordinary Canadians Protected $ 298 Billion from CRA Taxes

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