Tax Free Savings Accounts (TFSA)

In 2008, the Federal Government introduced a registered savings account that allows taxpayers to earn investment income tax-free. The Tax-Free Savings Account (TFSA) is available to Canadian Residents age 18 and older. TFSA allows taxpayers to set money aside in eligible investment vehicles and watch those savings grow tax-free throughout their lifetime.

There are no restrictions on the way TFSA funds (contributions and earnings) may be used (i.e. purchase a car, renovate a home, start a small business, take a family vacation, or just save for a rainy day). All income levels and all walks of life can benefit from a TFSA. But only a careful review of each person's financial situation will determine how to optimize use of RRSP's, RESP's, RRIF's and TFSAs.

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TFSA Contribution Limit

Contributions to a TFSA may only be made by the Holder and contribution room is not tied to income. The TFSA annual room limit will be indexed to inflation and rounded to the nearest $500. Therefore, it may be different every year.

  • The maximum TFSA contribution limit for 2020 remains at $6,000
  • Your individual contribution room is made up of your TFSA dollar limit, any unused contribution room from previous years, and any withdrawals made from your TFSAs the previous year.
  • Contributions are not tax deductible.

TFSA Unused Contribution Room

When a TFSA Holder contributes less than the maximum contribution limit, the difference is referred to a unused contribution room.

  • Unused contribution room will accumulate each year.
  • Unused contribtion room is carried forward indefinitely, allowing the Holder to catch up by contribution more than the maximum contribution limit in a future year.
  • A TFSA withdrawal will increase the contribution room for the year after withdrawal. As a result, when amounts are withdrawn from a TFSA they can be re-contributed in the future when funds become available.
  • Canada Revenue Agency can confirm your contribution room. The CRA recommends TFSA holders take advantage of their online service option My Account to obtain the most up-to-date information about their TFSA transactions and available TFSA Contribution Room. Any changes to the holder's TFSAs are uploaded daily as the TFSA information from TFSA issuers is received and processed.
  • In addition to the My Account section of the CRA website, the following are additional resources available to TFSA holders in obtaining confirmation of their TFSA Contribution Room:

Qualified Investments

Generally, the types of investments that will be permitted in a TFSA are the same as those permitted in a registered retirement savings plan (RRSP). This would include:
  • cash
  • mutual funds
  • securities listed on a designated stock exchange
  • guaranteed investment certificates (GICs)
  • bonds
  • certain shares of small business corporations.

Where can I find more information?

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