What is it?
The TFSA was introduced by the Canadian government and came into effect in January 2009 as a way of helping Canadians save for different purposes throughout their lifetime. The TFSA allows for tax-free growth of investment income and capital gains, while providing flexibility for contributions and withdrawals
Because of its tax-free aspect, the government imposed maximum contributions inside this account. Moreover, to be allowed to contribute you must be:
It is important to consider your age when contributing to a TFSA to know how much contributions can be made into the account. For example, someone who turned 18 years old in 2019 may only be allowed to contribute 18000$ (6000$ in 2019, 6000$ in 2020 and 6000$ in 2021) versus someone who was 18 years old in 2009 and never contributed to a TFSA, in 2021, that person would be entitled to the full 75500$ contribution space.
Contribution room automatically accumulates each year, with any unused contribution room carried forward indefinitely for use in subsequent years.
There is no tax deduction on contributions. However, an over-contribution may result in a tax penalty.
Who may benefit from a TFSA?
The bottom line on TFSAs: Regardless of age or investment time horizon, a TFSA should be considered as part of an overall investment strategy..
TFSA VS RRSP: CLICK HERE
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