Tax-Free Savings Account (TFSA)
For 2017, the TFSA dollar limit is $5,500 and will continue to be indexed to inflation in future years.
The annual TFSA dollar limit for the years 2009, 2010, 2011, and 2012 was $5,000; for 2013, 2014 it was increased to $5,500; for 2015, it was increased to $10,000; for 2016 it was reduced back to $5,500; for 2017, it remains at $5,500.
If you’ve never contributed to a TFSA, as of 2017 there is $52,000 total contribution room available. And for a couple, the higher-income earner can give money to the lower-income spouse (without attribution rules applying), allowing $104,000 in combined contribution room.
Get Started Now
For more information or to open or top-up a Tax Free Savings Account, visit your branch, call our Member Solutions Centre at 1.800.598.2891 or contact us.
10 Things to Know about the TFSA Expand/Collapse
1. All Canadian residents can open a Tax-Free Savings Account if they're 18 years of age or older and have filed a tax return.
2. The Tax-Free Savings Account will let you invest while not being taxed on the interest earned on investment savings.
3. A full range of investment options are available.
4. Unlike an RRSP, your contribution to a Tax-Free Savings Account will not be deducted from your income on your tax return, but the interest you earn will not be taxed -- so you get to keep what you earn.
5. Under proposed legislation, the annual TFSA dollar limit for 2015 is increasing from $5,500 to $10,000.
6. If you take money out of your Tax-Free Savings Account, you don't lose the contribution room -- you get it back in the following year. This is important to remember, because if you take it out you will have to wait until the next year before you can put the money back in.
7. If you don't make the maximum contribution, you don't lose the contribution room. The unused contribution room gets carried over to the following year. There is no limit to how much contribution room can be carried forward.
8. You can hold more than one Tax-Free Savings Account with any number of financial institutions but the total of the contributions must be within your total contribution limit in that year.
9. Money you take out of your Tax-Free Savings Account will not affect federal income-tested benefits and credits, so you're not penalized for saving.
10. Each year, the government will determine and advise you of your remaining available Tax-Free Savings Account contribution limit on your Notice of Assessment.
Investment Options Expand/Collapse
Eligibility and Qualified Investments Expand/Collapse
The individual owning the TFSA is the `Holder'. Any individual person (not trusts or corporations) who meets all of the following three requirements is eligible to open a TFSA:
- Resident in Canada, and
- 18 years of age or older, and
- Holds a valid Social Insurance Number (SIN)
- Term deposits and GICs
- Variable interest savings accounts
- Credit Union shares
- Index-linked term deposits
- Mutual funds
- Publicly traded securities
Non-Resident Holder Expand/Collapse
When a Holder is no longer a resident of Canada, the following rules apply:
- The TFSA may remain open.
- No contributions may be made.
- Non-resident Holder will not accumulate contribution room.
- Withdrawals will not increase contribution room.
- If a non-resident Holder makes a contribution, the Holder is subject to a 1% per month penalty tax for each month that the contribution remains in the TFSA
Contribution Limit and Unused Contribution Room Expand/Collapse
Contributions to a TFSA may only be made by the Holder and the amount is not tied to the income of the Holder.
- Under proposed legislation, the annual TFSA dollar limit for 2015 is increasing from $5,500 to $10,000 (subject to parliamentary approval).
- The maximum contribution limit may increase in future years depending on the rate of inflation and other factors.
- Contributions are not tax deductible.
Unused Contribution Room
When a TFSA Holder contributes less than the maximum contribution limit, the difference is referred to as `unused contribution room'.
- Unused contribution room will accumulate each year.
- Unused contribution room is carried forward indefinitely, allowing the Holder to 'catch up' by contributing more than the maximum contribution limit in a future year.
- A TFSA withdrawal will increase the contribution room for the year after withdrawal. As a result, when amounts are withdrawn from a TFSA they can be re-contributed in the future when funds become available. Canada Revenue Agency will confirm the contribution room on the annual Notice of Assessment.
Borrowing Money to Purchase a TFSA Expand/Collapse
Interest on money borrowed to purchase a TFSA is not deductible for tax purposes.
- Withdrawals are not reported as taxable income and are not subject to income tax.
- TFSA withdrawals of contribution/earnings will increase contribution room for future years, but not the current year.
- Withdrawals will not impact eligibility for federal income tested benefits and credits (e.g. OAS, GIS, Age Credit, GST, El, child-tax benefit, working income tax benefit).
- Transferable to a spouse/common-law partner on death of the Holder.
- Transferable to a former spouse/common-law partner on relationship breakdown
Death of the Holder Expand/Collapse
A TFSA Holder may appoint his/her spouse/ common-law partner as successor holder and beneficiary of the TFSA. Upon death of the Holder, the spouse/common-law partner will become the Holder of the TFSA. Alternatively, the surviving spouse/common-law partner may transfer the funds to a new or existing TFSA in his/her name. There will be no impact on the TFSA contribution room of the surviving spouse/common-law partner.