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More money in your pocket?

How government changes could impact education members.

December 7th, 2015 – The paycheques of education members could look a little different next year, thanks to the newly-elected federal government. Delivering on their election promises of a tax-cut for Canada’s middle class and tax-hike for the wealthiest ‘one per cent’, on December 7th the government changed personal income tax rates and reduced the Tax-Free Savings Account (TFSA) contribution limit.   The details are below, but net/net, it could mean more money to put in your pocket, to boost your emergency fund or put aside for your 4 over 5.

It’s being called ‘the middle-class tax cut’…

… meaning, if your taxable earnings are between $45,282 and $90,563, it’s good news for you. Your tax rate will drop from 22% to 20.5%.  This could mean saving up to $690 a year.* On the other end of the scale, those with income above $200,000 will experience an increase in the rate they are taxed: from 29% to 33%.

Say goodbye to the $10,000 TFSA max.

The motion also cut the maximum TFSA contribution back from $10,000 to its previous max of $5,500. If you contributed $10,000 in 2015, don’t worry – you don’t have to give it back.  And if you didn’t?  You still have time.  Educators’ Certified Financial Planner professional Marian Ollila says “Many investors mistakenly believe they must get the higher contribution of $10,000 in by the end of the year or it’s gone.  In reality, the annual limits are cumulative so past unused room can be used in future years.  Of course the sooner you get the money invested, the sooner it can start working for you.” The other good news?  The maximum allowable will increase with inflation.

If you’re disappointed that you can’t contribute that additional $4,500 to your TFSA, Educators Financial Group has other ways you can put that money to work. You could use it to maximize your Registered Retirement Savings Plan (for a 2015 top up, remember to do it before February 29th, 2016), or, ask your Educators investment advisor about investment vehicles that will let your money grow and compound over time.  Another good use for the funds would be to pay down high interest debt – reducing the amount of interest you pay will mean you can keep more of your money.

Down payments on homes $500,000+ to increase.

“If you’re thinking of buying a new home in the new year, be prepared to have to save more for the down payment”, says Educators’ Director of Lending Services, Amedeo Perfetto. The government is increasing the minimum down payment required for homes selling at $500,000 or more, come the new year.  Currently, homebuyers need to put down a minimum of 5% to qualify for Canada Mortgage and Housing Corporation insurance.  Starting February, any portion of a mortgage over $500,000 will need a 10% down payment.  (So, if you’re buying a home for $600,000, $500,000 would require 5% down and $100,000 would require 10%.)

How will the government changes affect you?

Make sure your financial plan continues to reflect your goals. Talk to an Educators Financial Advisor about these and other changes that could affect you.  Call us today at 1.800.263.9541.


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Note that Educators Financial Group partners with a number of lenders (we act as a mortgage broker), so rates and products are subject to change at any time without notice. Not all programs/features/benefits are available with each lender. Ask a lending specialist for full details.

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