Tax and Retirement Planning Flashcards

What is the annual TFSA contribution limit for 2024?

Answer: $7,000

The TFSA annual contribution limit was increased to $7,000 for 2024.

Which of the following describes the tax treatment of dividends received from Canadian corporations in a non-registered account?

Answer: Eligible for the dividend tax credit

Canadian eligible dividends benefit from the dividend tax credit, reducing the effective tax rate for Canadian residents.

A client converts their RRSP to a RRIF. Which statement is TRUE about minimum withdrawals?

Answer: A minimum amount must be withdrawn each year based on the account value and age

RRIF minimum withdrawals are mandatory annually and are calculated based on the account's market value and the annuitant's age.

Which type of investment income receives the most favorable tax treatment in Canada for individuals in a non-registered account?

Answer: Capital gains

Only 50% of capital gains are included in taxable income, making them the most tax-efficient of common investment income types.

What happens to unused RRSP contribution room?

Answer: It carries forward indefinitely

Unused RRSP contribution room accumulates and carries forward indefinitely, allowing future catch-up contributions.

A client withdraws $10,000 from their RRSP to fund a vacation. What is the tax consequence?

Answer: The amount is added to income and taxed at their marginal rate

RRSP withdrawals are fully included in taxable income in the year of withdrawal, with withholding tax applied as a prepayment.

Under the Home Buyers' Plan (HBP), what is the maximum amount a first-time home buyer can withdraw from their RRSP?

Answer: $35,000

Effective 2024, the HBP allows first-time home buyers to withdraw up to $35,000 from their RRSP tax-free for a qualifying home purchase.