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Starting on January 1, 2016, you can contribute an additional $5,500 to your Tax-Free Savings Account (TFSA) to benefit from tax-free growth. With the contribution room from 2009 through 2015, you will be able to contribute up to $46,500 to grow tax-free.
Who can open a TFSA?
- Any Canadian resident 18 years or older with a Social Insurance Number.
- The age of majority is 19 for residents of Newfoundland and Labrador, New Brunswick, Nova Scotia and British Columbia which may delay the opening of a TFSA. However, the accumulation of contribution room will start at age 18.
What are the benefits?
- Tax-free investment income, including interest, pidends and capital gains
- Any unused contribution room can be used in future years
- No upper age restriction on contributions unlike an Registered Retirement Savings Plan (RRSP)
- Make withdrawals any time for any purpose (e.g. car purchases, vacations, home renovations)
- Previous year's withdrawals are added back to your unused contribution room
- Income earned and withdrawals have no impact on federal income-tested benefits or credits (Guaranteed Income Supplement, Child Tax Benefit, Old Age Security, etc.)
- Canadians can contribute to their spouse's or common-law partner's TFSA subject to available contribution room
What are the considerations?
- Unlike an RRSP, contributions are not tax deductible
- Capital losses within the TFSA cannot be used to offset taxable capital gains outside the TFSA
- Interest on funds borrowed to fund the TFSA is not tax deductible
- Penalty tax on excess contributions
What investments are qualified for the TFSA?
- Cash, mutual funds, guaranteed investment certificates (GICs), publicly traded securities, and government and corporate bonds.
If you have any questions regarding how you can take advantage of the new proposed TFSA contribution limit, please contact us.
For more information, please contact us, or visit the Canada Revenue Agency website .