Open CELIAPP to maximize your contribution rights, is it a good idea?

Is opening CELIAPP sooner rather than later always a winning strategy?

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To the extent that a Tax-Free Savings Account for the Purchase of a First Property (CELIAPP) combines the benefits of both a Registered Retirement Savings Plan (RRSP) and a Tax-Free Savings Account (TFSA), many financial advisors highly recommend it.

Unlike the TFSA, which has had the maximum contribution each person can make added to its account since 2009, the maximum contribution to the CELIAPP only starts accumulating with the account opening.

The maximum contribution to CELIAPP is $8,000 per year, up to $40,000 for life.

So it may be tempting to open a CELIAPP account to maximize your contribution rights.

Unlike a TFSA, CELIAPP contribution rights do not necessarily add up from year to year.

In fact, “contribution rights unused in a given year can be carried over to the next year up to $8,000,” as we can read on the Épargne Placements Québec website.

For example, if, during the year your account was opened, you did not contribute to your CELIAPP, you would be able to contribute $16,000 the following year, i.e. $8,000 of unused contribution rights, and $8,000 of contribution rights for this year.

In the same way, if you deposit $3,000 into your CELIAPP in the first year, you will have $5,000 of unused contribution room the following year, so you will be able to contribute up to $13,000.

However, if you do not contribute to your CELIAPP account for two consecutive years, 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 this year.

Unlike a TFSA, a CELIAPP has an expiration date: the account is actually closed 15 years after it is opened.

The accumulated funds can then be transferred to an RRSP or EFER. Funds can also be withdrawn. However, it will be added to your annual income, so you will have to bear the tax impacts.

Therefore, opening a CELIAPP account can offer a certain advantage even if you do not plan to contribute to it in the same year, as you increase your maximum contribution in the second year of opening.

However, you should take into account the expiration date of the account. By opening a CELIAPP account early without being able to contribute to it, you limit the years during which you can benefit from the benefits the account offers.