A tax-free savings account (TFSA) is an account that allows your savings to grow tax-free. The annual TFSA dollar limit for 2017 is $5,500 and will be adjusted for inflation in $500 increments going forward. Unused contributions can be carried forward so if you have not yet contributed to a TFSA, your total potential maximum allowed contribution limit as of 2017 would be $52,000. The federal government first introduced TFSAs in 2009. The annual TFSA dollar limit for the years 2009, 2010, 2011 and 2012 was $5,000. The annual TFSA dollar limit for the years 2013, 2014 and 2016 was $5,500 and the limit for 2015 was $10,000.
TFSAs and RRSPs both offer tax advantages and can hold similar investments such as cash, mutual funds, stocks and bonds. However, unlike an RRSP, you can withdraw funds from a TFSA at any time and for any purpose, with no tax penalty. On the flip side, TFSA contributions are not deductible, so they don’t reduce your income for tax purposes.
TFSAs are available to Canadians aged 18 and older, and can be beneficial for a variety of financial needs:
Contact your financial advisor today to learn the benefits of using Tax-Free Savings Accounts (TFSAs) or to open a Sentry TFSA.