Canadians need to save for many different purposes over their lifetimes. Reducing tax on savings can help. That is why the Government introduced the Tax-Free Savings Account (TFSA) in 2009. It is the single most important personal savings vehicle since introduction of the Registered Retirement Savings Plan (RRSP) in 1957.
The TFSA allows Canadians to set money aside in eligible investment vehicles and watch those savings grow tax-free throughout their lifetimes. Your TFSA savings can be used for any purpose, such as maximizing your savings in a tax free environment or to purchase a new car, renovate a house, start a small business, or saving to take a vacation. All Canadians can benefit from using a TFSA.
Year * | Actiual Limit $ Amount | Accumulated Contribution Limit** |
2024 | $7,000 | $95,000 |
2023 | $6,500 | $88,000 |
2022 | $6,000 | $81,500 |
2021 | $6,000 | $75,500 |
2020 | $6,000 | $69,500 |
2019 | $6,000 | $63,500 |
2018 | $5,500 | $57,500 |
2017 | $5,500 | $52,000 |
2016 | $5,500 | $46,500 |
2015 | $10,000 | $41,000 |
* The TFSA annual contribution limit is indexed to inflation, and rounded to the nearest $500 unless the government makes revisions. The CRA’s indexation increase for 2024 is 4.7%, down from 6.3% in 2023.
** Anyone age 18 or older and who has a valid social insurance number is eligible to open a TFSA (Age 19 in BC). Contribution room begins accumulating in the year in which a person turns 18, even if they have not yet opened a TFSA account.
For those TFSA Account Holders who have withdrawn from TFSAs, their crystallized gains and losses from withdrawals are factored in to their TFSA room. The formula is:
Unused TFSA contribution room to date + total withdrawal made in this year + next year’s TFSA dollar limit = TFSA contribution room at the beginning of next year (Jan 1st)
Where an investor (referred to as TFSA Account Holder) is non-compliant with the CRA TFSA rules, the holder will incur penalties, for reasons such as:
The holder is subject to special tax on advantages, being a 1% per month penalty for any month in which there is an excess amount in the TFSA at any time in the month. As a result, there is tax payable even if the excess amount is withdrawn in the same month in which it is contributed.
The TFSA unused contribution room is carried forward into the next year, and there is no deadline for TFSA contributions. It is recommended to make withdrawals by December 31st in any year in order to have the amount withdrawn added back earlier to the accumulated TFSA contribution room in January of the following year.
Macnaughton & Ward Financial represents many Financial Institutions offering TFSA’s in the form of High Interest Savings Accounts (HISA), GIC’s, Guaranteed Investment Funds, Segregated Funds, Equity Linked GIC’s and more.
Updated: February 2024