TFSA

TFSA

Tax Free Savings Account - Saving without hassles

The Tax-Free Savings Account (TFSA) is a flexible, registered general-purpose savings vicle that allows Canadians to earn tax-free investment income to more easily meet lifelong savings needs. The TFSA complements existing registered savings plans like the Registered Retirement Savings Plans (RRSP) Pensions and the Registered Education Savings Plans (RESP). 

Contributions

The maximum amount that you can contribute to your TFSA is limited by your TFSA contribution room. 
All TFSA contributions made during the year, including the replacement or re-contribution of withdrawals
made from a TFSA, will count against your contribution room.

Note

Qualifying transfers, exempt contributions and specified distributions are not considered in the calculation 
of contribution room.At any time in the year, if you contribute more than your allowable TFSA contribution room,
you will be considered to be over-contributing to your TFSA and you will be subject to a tax equal to 1% of the
highest excess TFSA amount in the month, for each month that the excess amount remains in your account.
For more information, see "TFSA excess amount correspondence explained".You do not need to have earned
income to contribute to a TFSA. As the account holder you are the only person who can do the following with your
TFSA:
  • make contributions
  • make withdrawals
  • determine how funds are invested
You can give your spouse or common-law partner money to contribute to their own TFSA without having that 
amount, or any earnings from that amount being attributed back to you, but the total contributions you each
make to your own TFSAs cannot be more than your TFSA contribution room. For more information, see "TFSA
contribution room" on this page.Contributions made to a TFSA are not tax-deductible.Management fees related
to a TFSA trust and paid by the holder are not considered to be contributions to the TFSA. The payment of
investment counsel, transfer, or other fees by a TFSA trust will not result in a distribution (withdrawal) from the
TFSA trust.

TFSA contribution room

Your TFSA contribution room is the maximum amount that you can contribute to your TFSA.Starting in 2009, 
TFSA contribution room accumulates every year, if at any time in the calendar year you are 18 years of age or
older and a resident of Canada.

Note

Only contributions made under a valid social insurance number are accepted as TFSA contributions.You will 
accumulate TFSA contribution room for each year even if you do not file an income tax and benefit return or
open a TFSA.The annual TFSA dollar limit for years 2009, 2010, 2011 & 2012 was $5,000.The annual TFSA
dollar limit for years 2013 and 2014 was $5,500.The annual TFSA dollar limit for 2015 was $10,000.The annual
TFSA dollar limit for years 2016, 2017 was $5,500.The annual TFSA dollar limit for the year 2018 was $5,500.
The annual TFSA dollar limit for the year 2019 is $6,000.The TFSA annual room limit will be indexed to inflation
and rounded to the nearest $500.Investment income earned by, and changes in the value of TFSA investments
will not affect your TFSA contribution room for the current or future years. For an example, see
Example 1 – TFSA contribution room.

 

How your TFSA contribution room is determined

The TFSA contribution room is made up of:
  • your TFSA dollar limit plus indexation
  • any withdrawals made from the TFSA in the previous year

Note

Qualifying transfers, exempt contributions and specified distributions are not considered in the calculation 
of contribution room.For an example, see Example 2 – TFSA contribution room.An individual will not accumulate
TFSA contribution room for any year during which the individual is a non-resident of Canada throughout the
entire year.The TFSA dollar limit is not prorated in the year an individual:
  • turns 18 years of age;
  • dies
  • becomes a resident or a non-resident of Canada.

Note

You can have more than one TFSA at any given time, but the total amount you contribute to all your TFSAs 
cannot be more than your available TFSA contribution room for that year. As the account holder, you are the
only person who can contribute to your TFSA.  

Examples – TFSA contribution room

Example 1

Brayden was eager to open his TFSA, but he didn’t turn 18 until December 21, 2016. On January 4, 2017, 
he opened a TFSA and contributed $11,000 ($5,500 for 2016 plus $5,500 for 2017 – the maximum TFSA
dollar limits for those years). On the advice of his broker, he had opened a self-directed TFSA and invested
in stocks that increased in value. By the end of 2017, the value in Brayden’s TFSA had increased to $11,800.
Brayden was worried that for 2018, he would only be able to contribute $4,700 (the TFSA dollar limit of $5,500
for 2018 less the $800 increase in value in his TFSA through 2017). Neither the earnings generated in the
account nor the increase in its value will reduce the TFSA contribution room in the following year, so Brayden
can contribute up to another $5,500 in 2018 to his TFSA.

Example 2

From 2011 until the end of 2016, Josh contributed the maximum TFSA dollar limit each year. He did not make 
any other contributions or withdraw any funds. As a result of his $5,500 contribution in 2016, his unused TFSA
contribution room at the end of 2016 was zero.His TFSA contribution room at the beginning of 2017 was $5,500
(the 2017 TFSA dollar limit).On June 15, 2017, Josh made a contribution of $500. On October 26, 2017, he
withdrew $4,000.His unused TFSA contribution room at the end of 2017 was $5,000 ($5,500 - $500).Josh
makes the following calculation to determine his TFSA contribution room at the beginning of 2018 as follows:

Step 1: Calculate Unused TFSA contribution room at the end of 2017TFSA contribution room at the beginning of
2017 ($5,500) minus contributions made in 2017 ($500) = Unused TFSA contribution room at the end of 2016
($5,000)Step 2: Calculate TFSA contribution room at the beginning of 2018Unused TFSA contribution room at the
 end of 2017 ($5,000) + total withdrawal made in 2017 ($4,000) + 2018 TFSA dollar limit ($5,500) = TFSA
contribution room at the beginning of 2018 ($14,500).
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