This registered account saw its debut in 2009 thanks to Jim Flaherty. The government wanted to encourage citizens to invest their money, so they created an account where all of your gains are free of tax. However, there are some rules to keep in mind:
- You have to be at least 18 years of age in order to open an account.
There is a maximum amount of money that can be transferred in. The government can change this amount year over year, but it usually ranges from 5-10k. Fortunately, this contribution limit never expires, which means any unused portion of your limit will carry forward to the following year. See the table below for yearly contribution limits:
||TFSA Annual Limit
|2009, 2010, 2011, 2012
|2016, 2017, 2018
*To calculate your contribution limit, add up any unused annual limits and any withdrawals from your TFSA, then subtract any deposits you’ve made into the account. In other words,
Contribution Room = Annual Limits + Withdrawals – Deposits
For help calculating your contribution room, check out our TFSA Contribution Calculator.
- Any gains realized in the account are tax-free, as well as any transfers out of the account.
- Transfers out of the account increase your contribution limit for the following year. In other words, if you need to take money out of your TFSA, you can contribute that amount the following year in addition to the annual limit.