Tax Free Savings Accounts
Starting in 2009 an additional savings plan, the Tax Free Savings Account (TFSA) became available to Canadians age 18 and older to provide a savings vehicle to meet any on-going savings need.
TFSA contributions are made from after-tax income, with both the contributions and the investment earnings exempt from tax upon withdrawal. Withdrawals will not affect eligibility for federal income-tested benefits or tax credits.
Annual Contribution Limits for TFSAs
- 2009 - $5,000
- 2010 - $5,000
- 2011 - $5,000
- 2012 - $5,000
- 2013 - $5,500
- 2014 - $5,500
- Annual new contribution is currently $5,500 per year. Increase, rounded to the nearest $500, will be applied as warranted by the consumer price index.
- Penalty for over-contributions is one per cent per month on the highest excess contribution at any time during the month.
- Withdrawals in a year will be added to contribution room in the following calendar year.
- Any income attributable to deliberate over-contributions will be taxed at 100 per cent. As well, the withdrawal of amounts in respect of deliberate over-contributions, prohibited investments, non-qualified investments, asset transfer transactions and income related to those amounts do not create additional TFSA contribution room.