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The federal government has given Canadians 500 more reasons to invest in a tax-free savings account — namely a $500 increase in the annual contribution limit.

Canadians will be able to add the $500 starting in 2013, raising the annual maximum to $5,500.

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“Our government remains committed to our low-tax plan for jobs and growth and we are very pleased to offer Canadians ways to save on taxes and keep more of their hard-earned money,” said Ted Menzies, minister of state (finance), in a statement.

“TFSAs have become an exceedingly valuable savings tool for so many Canadians.”

Since the program was announced by the Conservative, it has become a popular savings tool. Like the Registered Retirement Savings Plan, money accrues inside the TFSA with no tax. TFSA contributions do not reduce taxable income but unlike RRSPs, withdrawals are not taxed.

Based on four years of contributions, Canadians can now have made $20,000 in contributions to their TFSA. Ottawa says 8.2 million Canadians have opened an account and roughly 2.5 million Canadians contributed the maximum amount in 2011.