2024-01-07 01:01:52
Opening a CELIAPP sooner rather than later, is it always a winning strategy?
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To the extent that the tax-free savings account for the purchase of a first property (CELIAPP) combines the advantages of both the registered retirement savings plan (RRSP) and the tax-free savings account tax (TFSA), many financial advisors highly recommend it.
Unlike the TFSA, for which the maximum contribution that each person can make to their account has been added since 2009, the maximum contribution to the CELIAPP only begins to accumulate with the opening of the account.
The maximum contribution to CELIAPP is $8,000 per year, up to $40,000 for life.
Opening a CELIAPP account to maximize your contribution rights can therefore be tempting.
Unlike the TFSA, the CELIAPP contribution rights are not necessarily added from year to year.
In fact, “unused contribution rights in a given year can be carried over to the following year up to $8,000,” we can read on the Épargne Placements Québec website.
If, for example, during the year your account is opened, you do not contribute to your CELIAPP, you will be able to contribute $16,000 the following year, i.e. $8,000 of unused contribution rights, and $8,000 of rights contribution for this year.
In the same way, if you place $3,000 in your CELIAPP the first year, you will have $5,000 of unused contribution room the following year, and will thus be able to contribute up to $13,000.
If, however, you do not contribute to your CELIAPP account two years in a row, your rights for the third year will not increase to $24,000, but will remain at $16,000, i.e. still 8,000 of unused contribution rights, and $8,000 of contribution rights for this year.
Unlike a TFSA account, the CELIAPP has an expiration date: the account is in fact closed following 15 years of opening.
The accumulated money can then be transferred to an RRSP or EFER. Funds can also be withdrawn. However, these will be added to your annual income, so you will have to assume the tax impacts.
Opening a CELIAPP account can thus present a certain advantage even if you do not plan to contribute to it the same year, since you increase your maximum contribution for the second year of opening.
However, you must take into account the expiration date of the account. By opening a CELIAPP account early without being able to contribute to it, you reduce the years during which you can benefit from the advantages offered by the account.
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