{"id":53956,"date":"2022-01-23T18:00:01","date_gmt":"2022-01-23T23:00:01","guid":{"rendered":"https:\/\/env-hardbacon-dev.kinsta.cloud\/?p=53956"},"modified":"2022-02-18T10:49:21","modified_gmt":"2022-02-18T15:49:21","slug":"the-ultimate-guide-to-tfsas","status":"publish","type":"post","link":"https:\/\/env-hardbacon-dev.kinsta.cloud\/en\/investing\/the-ultimate-guide-to-tfsas\/","title":{"rendered":"The Ultimate Guide to TFSAs"},"content":{"rendered":"<p>A tax-free savings account (TFSA) is a Canadian account and does precisely as the name suggests; it offers a tax break on your contribution income. This means that, unlike a non-registered investment account or a regular savings account, the money you put into your TFSA isn't taxed, even when you withdraw it. According to <a href=\"https:\/\/www12.statcan.gc.ca\/census-recensement\/2016\/as-sa\/98-200-x\/2016013\/98-200-x2016013-eng.cfm\" data-lasso-id=\"14114\">2016 statistics<\/a>, the average usage rate of a TFSA was an impressive 40.4% for Canada as a whole. The highest usage rate was in Ontario with a hefty 45% of households! These remarkable numbers only prove that TFSAs are a popular investment choice. Let's take a look at TFSAs in Canada, from how they work to the pros and cons.<\/p>\r\n\r\n\r\n\r\n<div class=\"wp-block-spacer\" style=\"height: 48px;\" aria-hidden=\"true\">\u00a0<\/div>\r\n\r\n\r\n\r\n<h2>What is a tax-free savings account?<\/h2>\r\n\r\n\r\n\r\n<div class=\"wp-block-spacer\" style=\"height: 20px;\" aria-hidden=\"true\">\u00a0<\/div>\r\n\r\n\r\n\r\n<p>A <a href=\"\/?p=32098\" data-lasso-id=\"14115\">tax-free savings account<\/a> is a government-sponsored investment account that can be used for any purpose. You can invest or save up to a certain amount in a TFSA each year if you are over 18 years old, and any unused contribution room can get carried over to future years. A TFSA is a tax shelter account that allows every Canadian to save and invest tax-free.<\/p>\r\n\r\n\r\n\r\n<p>TFSAs are pretty adaptable and can be used to save for anything, such as retirement, vacations, a car, a wedding, or anything your heart desires. Once you've saved up enough money, you can withdraw it without penalty and without paying taxes.\u00a0 The following aren't taxed and can be withdrawn tax-free from a TFSA in Canada:<\/p>\r\n\r\n\r\n\r\n<ul>\r\n<li>Contributions\u00a0<\/li>\r\n<li>Dividends<\/li>\r\n<li>Interest earned\u00a0<\/li>\r\n<li>Capital gains\u00a0<\/li>\r\n<\/ul>\r\n\r\n\r\n\r\n<p>TFSAs are very versatile. They allow you to hold certain investments in your account. This lets you adapt your account to your specific financial plans and goals. Types of investments you can hold in your TFSA include:<\/p>\r\n\r\n\r\n\r\n<ul>\r\n<li>Cash\u00a0<\/li>\r\n<li>Stocks<\/li>\r\n<li>Bonds<\/li>\r\n<li>Mutual funds<\/li>\r\n<li><a href=\"\/?p=39340\" data-lasso-id=\"14116\">Exchange-traded funds (ETFs)<\/a><\/li>\r\n<li>Guaranteed investment certificates (GICs)<\/li>\r\n<\/ul>\r\n\r\n\r\n\r\n<p>Three types of TFSAs are available, namely:<\/p>\r\n\r\n\r\n\r\n<ul>\r\n<li>Deposits<\/li>\r\n<li>Arrangement in trust<\/li>\r\n<li>Annuity contracts<\/li>\r\n<\/ul>\r\n\r\n\r\n\r\n<p>These TFSAs are issued by:<\/p>\r\n\r\n\r\n\r\n<ul>\r\n<li>Insurance companies<\/li>\r\n<li>Banks<\/li>\r\n<li>Trust companies<\/li>\r\n<li>Credit unions<\/li>\r\n<li>Robo-advisors<\/li>\r\n<\/ul>\r\n\r\n\r\n\r\n<div class=\"wp-block-spacer\" style=\"height: 48px;\" aria-hidden=\"true\">\u00a0<\/div>\r\n\r\n\r\n\r\n<h2>When was the TFSA program introduced in Canada?<\/h2>\r\n\r\n\r\n\r\n<div class=\"wp-block-spacer\" style=\"height: 20px;\" aria-hidden=\"true\">\u00a0<\/div>\r\n\r\n\r\n\r\n<p>In 2008, Canadian Minister of Finance Jim Flaherty announced the TFSA as part of the federal budget for 2009. Persons 18 years of age or older with a valid social insurance number (SIN)\u00a0could begin contributing on January 1, 2009, when the program entered into effect.\u00a0<\/p>\r\n\r\n\r\n\r\n<p>The program's original goal was to assist Canadians with saving for things like a new vehicle, a home renovation, a small business start-up, or a family vacation. However, since its inception, it has evolved into a tool for saving and investing.\u00a0 Now, TFSAs are commonly used for longer-term <a href=\"\/?p=4982\" data-lasso-id=\"14117\">financial goals<\/a> such as retirement.\u00a0<\/p>\r\n\r\n\r\n\r\n<div class=\"wp-block-spacer\" style=\"height: 48px;\" aria-hidden=\"true\">\u00a0<\/div>\r\n\r\n\r\n\r\n<h2>How the TFSA works in Canada<\/h2>\r\n\r\n\r\n\r\n<div class=\"wp-block-spacer\" style=\"height: 20px;\" aria-hidden=\"true\">\u00a0<\/div>\r\n\r\n\r\n\r\n<p>The TFSA is a multi-purpose investment account. The money in your TFSA can be used whenever and however you want. It is much more flexible than other registered accounts that are committed to specific goals, such as retirement savings or post-secondary education.<\/p>\r\n\r\n\r\n\r\n<p>As the name suggests, all forms of income earned from investments within the Tax-Free Savings Account are tax-free. This includes any interest, dividends, or capital gains. Even though the term &#8220;savings account&#8221; is included in the name, your TFSA is a powerful investment tool.\u00a0<\/p>\r\n\r\n\r\n\r\n<p>Under the TFSA umbrella, you can open a variety of investment vehicles including mutual funds, GICs, robo-advisors, and <a href=\"\/?p=34307\" data-lasso-id=\"14118\">self-directed brokerage accounts<\/a>. Investing in your TFSA is the best approach to optimize its tax-advantaged potential. That\u2019s because a TFSA often provides a higher return rate than a traditional savings account.<\/p>\r\n\r\n\r\n\r\n<div class=\"wp-block-spacer\" style=\"height: 48px;\" aria-hidden=\"true\">\u00a0<\/div>\r\n\r\n\r\n\r\n<h2>Contributions to your TFSA<\/h2>\r\n\r\n\r\n\r\n<div class=\"wp-block-spacer\" style=\"height: 20px;\" aria-hidden=\"true\">\u00a0<\/div>\r\n\r\n\r\n\r\n<p>TFSAs are as straightforward as they come. Post-tax contributions are made, and they grow tax-free. They assist you in avoiding taxation on the growth of your investments.<\/p>\r\n\r\n\r\n\r\n<p>Each person over 18 years old has a TFSA contribution limit of $6,000 per year, which increases each year. The contribution room that hasn't been used yet can be used in the future. Sign in to the <a href=\"https:\/\/www.canada.ca\/en\/revenue-agency\/services\/e-services\/e-services-individuals\/account-individuals.html\" data-lasso-id=\"14119\">CRA's online site<\/a> to check your contribution room or get a <a href=\"https:\/\/www.canada.ca\/en\/revenue-agency\/corporate\/contact-information.html\" data-lasso-id=\"14120\">TFSA Room Statement<\/a> from the CRA. With a TFSA, there is no lifetime cap, and your contribution room grows each year!<\/p>\r\n\r\n\r\n\r\n<p>When it comes to contributing to your TFSA Canada, there are two contribution limits to keep in mind:\u00a0<\/p>\r\n\r\n\r\n\r\n<ul>\r\n<li>The annual contribution limit<\/li>\r\n<li>The lifetime contribution limit<\/li>\r\n<\/ul>\r\n\r\n\r\n\r\n<p>If you over-contribute to your TFSA, you'll have to pay a monthly fee of 1% of the amount you over-contributed until you withdraw it. The <a href=\"https:\/\/www.canada.ca\/en\/revenue-agency.html\" data-lasso-id=\"14121\">Canada Revenue Agency (CRA)<\/a> keeps track of your TFSA contributions and withdrawals, and if you put too much money in your TFSA, you'll face the over-contribution penalty. If you\u2019re not careful, you could negate the benefits of a TFSA by over-contributing.\u00a0<\/p>\r\n\r\n\r\n\r\n<div class=\"wp-block-spacer\" style=\"height: 48px;\" aria-hidden=\"true\">\u00a0<\/div>\r\n\r\n\r\n\r\n<h3>Annual contribution limit<\/h3>\r\n\r\n\r\n\r\n<div class=\"wp-block-spacer\" style=\"height: 20px;\" aria-hidden=\"true\">\u00a0<\/div>\r\n\r\n\r\n\r\n<p>Each year, every Canadian\u00a0over 18 receives the same amount of yearly TFSA contribution room.\u00a0 The maximum contribution room has grown from $5,000 in 2009 to $10,000 in 2015. The annual contribution limit for 2021 is $6,000. To calculate\u00a0your lifetime contribution limit, you'll need to know your yearly contribution limits since you turned 18. Also, the annual contribution\u00a0limit for TFSAs will get adjusted for inflation and rounded up to the nearest $500.<\/p>\r\n\r\n\r\n\r\n<p><strong>2009 \u2013 2012<\/strong>: The annual TFSA contribution limit was $5,000.<\/p>\r\n\r\n\r\n\r\n<p><strong>2013 \u2013 2014<\/strong>: The annual TFSA contribution limit was $5,500.<\/p>\r\n\r\n\r\n\r\n<p><strong>2015<\/strong>: The annual TFSA contribution limit was $10,000.<\/p>\r\n\r\n\r\n\r\n<p><strong>2016 \u2013 2018<\/strong>: The annual TFSA contribution limit was $5,500.<\/p>\r\n\r\n\r\n\r\n<p><strong>2019 \u2013 2020<\/strong>: The annual TFSA contribution limit was $6,000.<\/p>\r\n\r\n\r\n\r\n<p><strong>2021<\/strong>: The annual TFSA contribution limit is $6,000.<\/p>\r\n\r\n\r\n\r\n<div class=\"wp-block-spacer\" style=\"height: 48px;\" aria-hidden=\"true\">\u00a0<\/div>\r\n\r\n\r\n\r\n<h3>Lifetime contribution limit<\/h3>\r\n\r\n\r\n\r\n<div class=\"wp-block-spacer\" style=\"height: 20px;\" aria-hidden=\"true\">\u00a0<\/div>\r\n\r\n\r\n\r\n<p>The amount of money you can put into a TFSA is referred to as your contribution room. You have accumulated contribution room for every year since 2009 that you were 18 or older and a resident of Canada, even if you didn't have a TFSA at the time. Log into your account on the Canada Revenue Agency (CRA) website to find out how much contribution room you have.\u00a0<\/p>\r\n\r\n\r\n\r\n<p>To put it differently, if you turned 18 before this year and are starting your first TFSA, you can contribute more than this year's annual contribution limit to catch up\u00a0on the missed\u00a0years. Similarly, if you withdraw funds from your TFSA, you will get that contribution room\u00a0back in the following year. Let's look at an example:<\/p>\r\n\r\n\r\n\r\n<p>If you're 22 years old, turned 18 in 2016, and you've never opened a TFSA Canada:<\/p>\r\n\r\n\r\n\r\n<p>Between 2016 and 2021, you are eligible for the combined contribution room. The maximum contribution limit for 2016\u20132018 was $5,500, and the maximum contribution limit for 2019\u20132021 was $6,000. For all of these years, the total contribution limit is $34,500. Because you've never utilized a TFSA before, you'll be able to contribute the total amount in 2020 without incurring any penalties.<\/p>\r\n\r\n\r\n\r\n<p>For those 18 or older in 2009, the TFSA lifetime contribution room in 2021 is $75,500. However, since the\u00a0TFSA permits your investments to grow tax-free, you could have\u00a0thousands of dollars more in your TFSA attributable to interest, dividends, and capital gains. Time is money.\u00a0<\/p>\r\n\r\n\r\n\r\n<p>TFSAs are\u00a0one of the most valuable and flexible financial solutions accessible to Canadians. And it's completely free as long as you stick to your contribution limits. If you make an over-contribution, the CRA will tax you at 1% per month on the largest excess TFSA amount until you withdraw it.<\/p>\r\n\r\n\r\n\r\n<div class=\"wp-block-spacer\" style=\"height: 48px;\" aria-hidden=\"true\">\u00a0<\/div>\r\n\r\n\r\n\r\n<h2>How to withdraw from your TFSA<\/h2>\r\n\r\n\r\n\r\n<div class=\"wp-block-spacer\" style=\"height: 20px;\" aria-hidden=\"true\">\u00a0<\/div>\r\n\r\n\r\n\r\n<p>It's just as straightforward\u00a0to withdraw funds out of your TFSA\u00a0as it is to put money into it. You don't need to fill out any paperwork or make special arrangements to withdraw money from your TFSA. You must, however, be aware of how your withdrawals impact your contribution limits for that year. Remember, when withdrawing funds out of your TFSA, you won't be able to get that\u00a0contribution room\u00a0again until the following calendar year. Here's an example:<\/p>\r\n\r\n\r\n\r\n<p>You\u00a0cannot replace the entire withdrawal amount within the same year if you\u00a0contribute\u00a0$5,500 for the tax year 2020. The contribution limit is $6,000, so if you withdraw $2,000, your available contribution room is still just $500. You can replace\u00a0$500 and re-contribute the remaining $1,500 at the beginning of 2021 when your withdrawal amount is added to your contribution room.<\/p>\r\n\r\n\r\n\r\n<p>Because investment gains in your TFSA Canada\u00a0are tax-free, they are not counted as taxable income and form part of your contribution room when you withdraw. Here\u2019s an example:<\/p>\r\n\r\n\r\n\r\n<p>You would have $5,250 in your TFSA account if you put $5,000 in and gained $250 in capital gains. You have the option of withdrawing the entire $5,250 tax-free. The following calendar year, you would get $5,250 added back to your contribution room.<\/p>\r\n\r\n\r\n\r\n<p>Money withdrawn from a TFSA will not affect Canada Pension Plan payments or other income-related benefits for retirees. That means you don\u2019t have to worry about your TFSA interfering with access to your government benefits. You can invest with the stress.\u00a0<\/p>\r\n\r\n\r\n\r\n<div class=\"wp-block-spacer\" style=\"height: 48px;\" aria-hidden=\"true\">\u00a0<\/div>\r\n\r\n\r\n\r\n<h2>There are several benefits to having a TFSA in Canada:<\/h2>\r\n\r\n\r\n\r\n<div class=\"wp-block-spacer\" style=\"height: 20px;\" aria-hidden=\"true\">\u00a0<\/div>\r\n\r\n\r\n\r\n<ul>\r\n<li>Tax-free compounding: A TFSA's investments compound tax-free. This allows your investment to grow faster without being slowed down by annual taxes. You could be looking at $100,000s in tax-free compounding values! If you contribute around $3,500 into your TFSA every year for 40 years, you'll have an extra $358,963 in tax-free growth!<\/li>\r\n<\/ul>\r\n\r\n\r\n\r\n<ul>\r\n<li>You and your spouse can share a contribution room: Since TFSA contributions are made with after-tax earnings, the government won't\u00a0object if you give your spouse money to put into their TFSA. This suggests you can combine your contribution room with your spouse and make the most of their tax-free space. Unless you\u00a0want to be audited, you can't do this with an RRSP.<\/li>\r\n<\/ul>\r\n\r\n\r\n\r\n<ul>\r\n<li>Withdrawals can be made anytime: Withdrawals from a TFSA can be made at any time and are tax-free.<\/li>\r\n<\/ul>\r\n\r\n\r\n\r\n<ul>\r\n<li>There are no mandatory withdrawals: With TFSA Canada, there are no mandatory withdrawals. A TFSA can grow tax-free for the rest of your life. In comparison, after the age of 71, RRSPs have compulsory withdrawal rates.<\/li>\r\n<\/ul>\r\n\r\n\r\n\r\n<ul>\r\n<li>Regardless of income, the contribution room is the same: The contribution room for a TFSA is the same regardless of your income. This is ideal for those with a lower or moderate-income. It is conceivable for these households to tax-shelter a bigger percentage of their income. In tax-sheltered accounts, the average Canadian family may save <a href=\"https:\/\/laws-lois.justice.gc.ca\/eng\/acts\/I-3.3\/page-1.html\" rel=\"nofollow\" data-lasso-id=\"14122\">32%\u00a0of their income<\/a>. This increases for lower-income earners thanks to the TFSA.<\/li>\r\n<\/ul>\r\n\r\n\r\n\r\n<ul>\r\n<li>Government benefits will not be affected by withdrawals: Withdrawals from a TFSA are not considered income. This means that government benefits won't get impacted.\u00a0 This is highly beneficial for low-income seniors who get benefits with high clawback rates, which can range from 50% to 75% of the next dollar earned.<\/li>\r\n<\/ul>\r\n\r\n\r\n\r\n<ul>\r\n<li>The contribution room will return the following year: When you withdraw funds from your TFSA, the contribution room will return on January 1 of the following year. This means a TFSA can be used to save for a wedding or a down payment in the short or medium term.<\/li>\r\n<\/ul>\r\n\r\n\r\n\r\n<ul>\r\n<li>Upon death, there Is no tax: There is no tax on death because TFSAs are tax-free. This implies you can leave your assets to your children without incurring any tax implications.<\/li>\r\n<\/ul>\r\n\r\n\r\n\r\n<ul>\r\n<li>TFSAs can be used as collateral for a loan: A TFSA's assets can be used as collateral to secure a loan. So you can use a\u00a0 TFSA to obtain a mortgage\u00a0or anything similar. It's possible you won't be able to withdraw funds from your TFSA until the loan is paid completely.<\/li>\r\n<\/ul>\r\n\r\n\r\n\r\n<div class=\"wp-block-spacer\" style=\"height: 48px;\" aria-hidden=\"true\">\u00a0<\/div>\r\n\r\n\r\n\r\n<h2>There are also a few disadvantages of TFSAs in Canada:<\/h2>\r\n\r\n\r\n\r\n<div class=\"wp-block-spacer\" style=\"height: 20px;\" aria-hidden=\"true\">\u00a0<\/div>\r\n\r\n\r\n\r\n<ul>\r\n<li>Creditors don't offer protection: One significant disadvantage is that TFSAs are not protected from creditors. Your creditors may seize your TFSA if you are involved in a lawsuit or bankruptcy. If you utilize a TFSA to save for retirement, they may be able to take everything. In contrast,\u00a0 RRSPs\u00a0are creditor-protected.\u00a0Comprehensive vehicle or property insurance, as well as umbrella insurance, can protect you from this risk. This is all very risky if you're using your TFSA Canada as your\u00a0primary retirement account.<\/li>\r\n<\/ul>\r\n\r\n\r\n\r\n<ul>\r\n<li>There is no reduction in income tax: TFSA contributions, unfortunately, cannot be utilized to reduce your taxable income. As a result, you won't be able to reduce your taxable income by contributing to a TFSA. This makes an RRSP more attractive to high-income earners.<\/li>\r\n<\/ul>\r\n\r\n\r\n\r\n<div class=\"wp-block-spacer\" style=\"height: 48px;\" aria-hidden=\"true\">\u00a0<\/div>\r\n\r\n\r\n\r\n<h2>TFSA vs. RRSP: what's the difference?<\/h2>\r\n\r\n\r\n\r\n<div class=\"wp-block-spacer\" style=\"height: 20px;\" aria-hidden=\"true\">\u00a0<\/div>\r\n\r\n\r\n\r\n<p>Unlike a registered retirement savings plan (RRSP), a tax-free savings account can be used to save for anything. The two main differences between\u00a0 a tax-free savings account and\u00a0a registered retirement account are:<\/p>\r\n\r\n\r\n\r\n<ul>\r\n<li>RRSP contributions get\u00a0deducted from your taxable income. TFSA contributions are not tax-deductible.<\/li>\r\n<li>Withdrawals from a retirement plan are considered income and are taxed accordingly. Withdrawals from a TFSA are not subject to taxation.<\/li>\r\n<\/ul>\r\n\r\n\r\n\r\n<p>A tax credit is not given when money is invested in\u00a0a TFSA. However, you can do so with an RRSP, and when used properly, this credit can be a handy tool. If you make enough money to\u00a0break into a higher tax bracket, you may contribute to an RRSP and receive an exemption, allowing you to return to a lower bracket. When it comes time to take your RRSP savings in retirement, you'll almost certainly be in a reduced tax bracket, resulting in a lower lifetime tax bill.<\/p>\r\n\r\n\r\n\r\n<p>Diversification is always a brilliant idea when it comes to investing. Both <a href=\"\/?p=4739\" data-lasso-id=\"14123\">TFSAs <\/a>and <a href=\"\/en?p=20167\" data-lasso-id=\"14124\">RRSPs<\/a> are beneficial investment opportunities. The beauty of TFSAs and RRSPs is that you can use them both to enhance your investing journey.\u00a0<\/p>\r\n\r\n\r\n\r\n<div class=\"wp-block-spacer\" style=\"height: 48px;\" aria-hidden=\"true\">\u00a0<\/div>\r\n\r\n\r\n\r\n<h2>When you die, what happens to your TFSA?<\/h2>\r\n\r\n\r\n\r\n<div class=\"wp-block-spacer\" style=\"height: 20px;\" aria-hidden=\"true\">\u00a0<\/div>\r\n\r\n\r\n\r\n<p>If you name your spouse or common-law partner as a successor holder,\u00a0they can take over your plan without it affecting their own TFSA if you die. Alternatively, you can name a beneficiary or beneficiaries to receive the cash in your plan when you pass away.\u00a0<\/p>\r\n\r\n\r\n\r\n<p>Except for Quebec, all provinces and territories offer the beneficiary or successor holder option. Note that Quebec residents can make designations in their wills. Before making any tax or estate considerations, always consult with an attorney.<\/p>\r\n\r\n\r\n\r\n<div class=\"wp-block-spacer\" style=\"height: 48px;\" aria-hidden=\"true\">\u00a0<\/div>\r\n\r\n\r\n\r\n<h2>How do you open a TFSA?<\/h2>\r\n\r\n\r\n\r\n<div class=\"wp-block-spacer\" style=\"height: 20px;\" aria-hidden=\"true\">\u00a0<\/div>\r\n\r\n\r\n\r\n<p>A TFSA can be opened by any Canadian 18 years old or older and has a valid social insurance number (SIN). Simply send your SIN and date of birth to a financial institution, credit union, or insurance company that offers TFSAs. They'll likely need documentation, such as a birth certificate, to verify your identity. The entire procedure should not take more than ten minutes.<\/p>\r\n\r\n\r\n\r\n<p>Consider starting a TFSA with a financial institution with no minimum investment or low fees, providing each client with limitless phone assistance from trained specialists. In several provinces and territories, an individual must be 19 years old to enter into a contract,\u00a0including starting a TFSA. The TFSA contribution room for the year a person turns 18 gets carried over to the following year when that individual\u00a0turns 19 and can enter into a contract in that territory.<\/p>\r\n\r\n\r\n\r\n<div class=\"wp-block-spacer\" style=\"height: 48px;\" aria-hidden=\"true\">\u00a0<\/div>\r\n\r\n\r\n\r\n<h2>How to get the most out of your TFSA in Canada<\/h2>\r\n\r\n\r\n\r\n<div class=\"wp-block-spacer\" style=\"height: 20px;\" aria-hidden=\"true\">\u00a0<\/div>\r\n\r\n\r\n\r\n<p>The ideal use of your TFSA Canada\u00a0is to start saving for retirement. While it's tempting to use your TFSA to save for a trip, doing so is a waste of the account's capabilities. Keep a record of your annual and lifetime contribution limits to avoid exceeding them, as you want to avoid wasting any of your tax-free income on fees!<\/p>\r\n\r\n\r\n\r\n<div class=\"wp-block-spacer\" style=\"height: 48px;\" aria-hidden=\"true\">\u00a0<\/div>\r\n\r\n\r\n\r\n<div class=\"wp-block-uagb-faq uagb-faq__outer-wrap uagb-block-7e3801de uagb-faq-icon-row uagb-faq-layout-accordion uagb-faq-expand-first-false uagb-faq-inactive-other-true uagb-faq-equal-height\" role=\"tablist\" data-faqtoggle=\"true\">\r\n<div class=\"uagb-faq__wrap uagb-buttons-layout-wrap\">\r\n<div class=\"wp-block-uagb-faq-child uagb-faq-child__outer-wrap uagb-block-02c1337e\">\r\n<div class=\"uagb-faq-child__wrapper\">\r\n<div class=\"uagb-faq-item\" tabindex=\"0\" role=\"tab\">\r\n<div class=\"uagb-faq-questions-button uagb-faq-questions\"><span class=\"uagb-icon uagb-faq-icon-wrap\"><\/span><span class=\"uagb-icon-active uagb-faq-icon-wrap\"><\/span><span class=\"uagb-question\"><strong>How does a TFSA work in Canada?<\/strong><\/span><\/div>\r\n<div class=\"uagb-faq-content\">\r\n<p>The TFSA is a type of investment account that can be used for various\u00a0purposes. Unlike other registered accounts that get dedicated to specific goals, such as retirement savings or post-secondary education, you can utilize the money in your TFSA whenever and however you wish.<br \/><br \/>All sources of income earned from investments within the TFSA\u00a0are tax-free. Interest, dividends, and capital gains are all included. Despite the name's use of &#8220;savings account,&#8221; your TFSA is a potent investment instrument.<br \/><br \/>Under the TFSA umbrella, you can open a variety of financial vehicles, including mutual funds, robo-advisors,\u00a0GICs, and self-directed brokerage accounts. Because they often give a more significant return than traditional savings accounts, investing in your TFSA is the greatest way to maximize its tax-advantaged potential.<\/p>\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n\r\n\r\n\r\n<div class=\"wp-block-uagb-faq-child uagb-faq-child__outer-wrap uagb-block-37eb867e\">\r\n<div class=\"uagb-faq-child__wrapper\">\r\n<div class=\"uagb-faq-item\" tabindex=\"0\" role=\"tab\">\r\n<div class=\"uagb-faq-questions-button uagb-faq-questions\"><span class=\"uagb-icon uagb-faq-icon-wrap\"><\/span><span class=\"uagb-icon-active uagb-faq-icon-wrap\"><\/span><span class=\"uagb-question\"><strong>What is a TFSA in Canada?<\/strong><\/span><\/div>\r\n<div class=\"uagb-faq-content\">\r\n<p>A tax-free savings account (TFSA) is a Canadian investment account that allows you to deduct your contribution income from your taxable income. Unlike a non-registered investment account or an ordinary savings account, the money you put into a TFSA is tax-free, even when you withdraw it.<br \/><br \/>TFSAs are incredibly flexible and can be used to save for anything, including retirement, travel, a car, a wedding, or whatever else comes to mind.<\/p>\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n\r\n\r\n\r\n<div class=\"wp-block-uagb-faq-child uagb-faq-child__outer-wrap uagb-block-316e1b91\">\r\n<div class=\"uagb-faq-child__wrapper\">\r\n<div class=\"uagb-faq-item\" tabindex=\"0\" role=\"tab\">\r\n<div class=\"uagb-faq-questions-button uagb-faq-questions\"><span class=\"uagb-icon uagb-faq-icon-wrap\"><\/span><span class=\"uagb-icon-active uagb-faq-icon-wrap\"><\/span><span class=\"uagb-question\"><strong>When did TFSAs start in Canada?<\/strong><\/span><\/div>\r\n<div class=\"uagb-faq-content\">\r\n<p>Canadian Finance Minister Jim Flaherty introduced the TFSA in 2008 as part of the federal budget for 2009. On January 1, 2009, everyone aged 18 and up with a valid social insurance number (SIN) could start contributing.<br \/><br \/>The program was created to assist Canadians in saving for a new car, a home renovation, a family vacation, or\u00a0a small business start-up. However, it has evolved into a tool for saving for many purposes, most notably longer-term financial goals such as retirement.<\/p>\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n\r\n\r\n\r\n<div class=\"wp-block-uagb-faq-child uagb-faq-child__outer-wrap uagb-block-35adc106\">\r\n<div class=\"uagb-faq-child__wrapper\">\r\n<div class=\"uagb-faq-item\" tabindex=\"0\" role=\"tab\">\r\n<div class=\"uagb-faq-questions-button uagb-faq-questions\"><span class=\"uagb-icon uagb-faq-icon-wrap\"><\/span><span class=\"uagb-icon-active uagb-faq-icon-wrap\"><\/span><span class=\"uagb-question\"><strong>What is the annual contribution limit for a TFSA in Canada?<\/strong><\/span><\/div>\r\n<div class=\"uagb-faq-content\">\r\n<p>There are two contribution limits, namely the annual contribution limit and the lifetime contribution limit. Each Canadian over the age of 18 has a $6,000 annual TFSA contribution limit, which grows each year. The contribution room that hasn't been used yet is available for future use.\u00a0<br \/><br \/>Regarding the lifetime contribution limit, the amount of money you can put into a TFSA is referred to as your contribution room. Even though you didn't have a TFSA at the time, you accumulated contribution room for every year since 2009 that you were 18 or older and a Canadian resident.<br \/><br \/>If you over-contribute to your TFSA, you'll have to pay a monthly fee of 1% of the excess contribution amount until you withdraw it.<\/p>\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n\r\n\r\n\r\n<div class=\"wp-block-uagb-faq-child uagb-faq-child__outer-wrap uagb-block-570dc0ff\">\r\n<div class=\"uagb-faq-child__wrapper\">\r\n<div class=\"uagb-faq-item\" tabindex=\"0\" role=\"tab\">\r\n<div class=\"uagb-faq-questions-button uagb-faq-questions\"><span class=\"uagb-icon uagb-faq-icon-wrap\"><\/span><span class=\"uagb-icon-active uagb-faq-icon-wrap\"><\/span><span class=\"uagb-question\"><strong>Can you have more than one TFSA in Canada<\/strong>?<\/span><\/div>\r\n<div class=\"uagb-faq-content\">\r\n<p>Yes, you are allowed to have multiple TFSAs. However, it's crucial to note that it's the same account from the government's perspective because your TFSA contribution room remains the same. But, diversifying your TFSA, as you would your other investments, can be a smart idea. One TFSA can be used as a savings account, with the money remaining accessible and liquid as cash, while another TFSA can be used for investments such as GICs, stocks, ETFs, and other sorts of investments.<br \/><br \/>But there's one disclaimer: don't transfer money from one TFSA to another. Instead, have the institution transfer the funds for you to avoid making an unintentional deposit that reduces your contribution room.<\/p>\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n<\/div>","protected":false},"excerpt":{"rendered":"<p>A tax-free savings account (TFSA) is a Canadian account and does precisely as the name suggests; it offers a tax break on&#8230;<\/p>\n","protected":false},"author":134,"featured_media":53958,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_uag_custom_page_level_css":""},"categories":[155,279],"tags":[],"acf":[],"nelio_content":{"isAutoShareEnabled":true,"autoShareEndMode":"default","automationSources":{"useContentSentences":true,"useSocialTemplates":true,"useCustomSentences":false,"customSentences":[]},"followers":[],"suggestedReferences":[],"includedReferences":[],"efiUrl":"","efiAlt":"","highlights":[]},"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v19.2.1 (Yoast SEO v19.14) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>The Ultimate Guide to TFSAs | Hardbacon<\/title>\n<meta name=\"description\" content=\"A tax-free savings account (TFSA) is a Canadian account and does precisely as the name suggests; it offers a tax break.\" \/>\n<meta name=\"robots\" content=\"noindex, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Ultimate Guide to TFSAs\" \/>\n<meta property=\"og:description\" content=\"A tax-free savings account (TFSA) is a Canadian account and does precisely as the name suggests; it offers a tax break.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/env-hardbacon-dev.kinsta.cloud\/en\/investing\/the-ultimate-guide-to-tfsas\/\" \/>\n<meta property=\"og:site_name\" content=\"Hardbacon\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/hardbaconca\" \/>\n<meta property=\"article:published_time\" content=\"2022-01-23T23:00:01+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-02-18T15:49:21+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/env-hardbacon-dev.kinsta.cloud\/wp-content\/uploads\/2021\/11\/malvestida-magazine-FfbVFLAVscw-unsplash-scaled-e1637705426363.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1200\" \/>\n\t<meta property=\"og:image:height\" content=\"800\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Arthur Dubois\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@hardbaconca\" \/>\n<meta name=\"twitter:site\" content=\"@hardbaconca\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Arthur Dubois\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"14 minutes\" \/>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"The Ultimate Guide to TFSAs | Hardbacon","description":"A tax-free savings account (TFSA) is a Canadian account and does precisely as the name suggests; 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Since his arrival in Canada, he\u2019s built his credit score from nothing. Arthur invests in the stock market but doesn\u2019t pay any fees because he uses National Bank Direct Brokerage online broker and Wealthsimple\u2019s robo-advisor. He pays for his subscriptions online with his KOHO prepaid card, and uses his Tangerine credit card for most of his in-store purchases. When he buys bitcoins, it\u2019s with the BitBuy online platform. Of course it goes without saying that he uses the Hardbacon app so that he can manage all of his finances from one convenient place.","sameAs":["emartz2016@gmail.com"],"url":"https:\/\/env-hardbacon-dev.kinsta.cloud\/en\/author\/hardbacon-newsdesk\/"}]}},"uagb_featured_image_src":{"full":["https:\/\/env-hardbacon-dev.kinsta.cloud\/wp-content\/uploads\/2021\/11\/malvestida-magazine-FfbVFLAVscw-unsplash-scaled-e1637705426363.jpg",1200,800,false],"thumbnail":["https:\/\/env-hardbacon-dev.kinsta.cloud\/wp-content\/uploads\/2021\/11\/malvestida-magazine-FfbVFLAVscw-unsplash-150x150.jpg",150,150,true],"medium":["https:\/\/env-hardbacon-dev.kinsta.cloud\/wp-content\/uploads\/2021\/11\/malvestida-magazine-FfbVFLAVscw-unsplash-300x200.jpg",300,200,true],"medium_large":["https:\/\/env-hardbacon-dev.kinsta.cloud\/wp-content\/uploads\/2021\/11\/malvestida-magazine-FfbVFLAVscw-unsplash-768x512.jpg",768,512,true],"large":["https:\/\/env-hardbacon-dev.kinsta.cloud\/wp-content\/uploads\/2021\/11\/malvestida-magazine-FfbVFLAVscw-unsplash-1024x683.jpg",1024,683,true],"1536x1536":["https:\/\/env-hardbacon-dev.kinsta.cloud\/wp-content\/uploads\/2021\/11\/malvestida-magazine-FfbVFLAVscw-unsplash-1536x1024.jpg",1536,1024,true],"2048x2048":["https:\/\/env-hardbacon-dev.kinsta.cloud\/wp-content\/uploads\/2021\/11\/malvestida-magazine-FfbVFLAVscw-unsplash-2048x1365.jpg",2048,1365,true],"ebor-admin-list-thumb":["https:\/\/env-hardbacon-dev.kinsta.cloud\/wp-content\/uploads\/2021\/11\/malvestida-magazine-FfbVFLAVscw-unsplash-60x60.jpg",60,60,true]},"uagb_author_info":{"display_name":"Arthur Dubois","author_link":"https:\/\/env-hardbacon-dev.kinsta.cloud\/en\/author\/hardbacon-newsdesk\/"},"uagb_comment_info":0,"uagb_excerpt":"A tax-free savings account (TFSA) is a Canadian account and does precisely as the name suggests; it offers a tax break on...","_links":{"self":[{"href":"https:\/\/env-hardbacon-dev.kinsta.cloud\/en\/wp-json\/wp\/v2\/posts\/53956"}],"collection":[{"href":"https:\/\/env-hardbacon-dev.kinsta.cloud\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/env-hardbacon-dev.kinsta.cloud\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/env-hardbacon-dev.kinsta.cloud\/en\/wp-json\/wp\/v2\/users\/134"}],"replies":[{"embeddable":true,"href":"https:\/\/env-hardbacon-dev.kinsta.cloud\/en\/wp-json\/wp\/v2\/comments?post=53956"}],"version-history":[{"count":0,"href":"https:\/\/env-hardbacon-dev.kinsta.cloud\/en\/wp-json\/wp\/v2\/posts\/53956\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/env-hardbacon-dev.kinsta.cloud\/en\/wp-json\/wp\/v2\/media\/53958"}],"wp:attachment":[{"href":"https:\/\/env-hardbacon-dev.kinsta.cloud\/en\/wp-json\/wp\/v2\/media?parent=53956"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/env-hardbacon-dev.kinsta.cloud\/en\/wp-json\/wp\/v2\/categories?post=53956"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/env-hardbacon-dev.kinsta.cloud\/en\/wp-json\/wp\/v2\/tags?post=53956"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}