Tax Free Savings Account

Tax Free Savings Account

Tax Free Savings Accounts were introduced in Canada in 2009. A TFSA, as the name suggests, allows your investments to grow tax free.

This means that any gains from the investment are not taxable by Canada Revenue Agency and unfortunately any losses are not tax deductible against other capital gains. You can hold a variety of investments within your TFSA including stocks and Exchange Traded Funds (ETFs) making them very flexible accounts. TFSAs cannot be joint which means each person has their own contribution room. Near the end of each year CRA will announce the following year’s annual contribution limit. As of January 2022, the lifetime contribution limit is $81,500.

It’s also important to note account limits apply to your contributions, not your account balance. For example, if you contribute $75,000 (assuming you have the room) at the beginning of the year and your investments grow to $85,000, you can still contribute $6,500 in that year.

You must be the age of majority in your province to open a TFSA however contribution room begins at age 18.

Pros:

Cons: