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What you need to know about your TFSA contribution room

The TFSA is a registered account with some major benefits for the investor. The contribution room is going to increase on January 1, 2024 by another $7,000. For someone that has never used the TFSA (and they were born before 1991 and are a resident) this would mean a total contribution room of $95,000 starting from January 1, 2024. This is an excellent savings and investment tool for Canadians with the following benefits:

  • There is no tax on income earned in them. All capital gains, dividends and interest are tax free

  • No penalties for withdrawals - the contributions are made with after tax dollars and when you take the money out there is no tax to be paid

  • You can carry it over year to year. Unused contribution room is carried forward to the next year

  • There is no upper age limit on contributions

  • Your contribution room increases every January 1.

  • The CRA calculates the balance of your contribution room on January 1 - not in real time during the year

  • Money taken out of the TFSA increases your contribution room on January 1 of the following year. Not in real time during the year it was taken out. Ie. You need $20,000 in February, you might want to take it out in December so that the contribution room regenerates in January. If you took the money out in February you would get the space back in January of the following year.

You are always best to check your contribution room with your My CRA account (or from your last tax return), however, the TFSA is an excellent account for investing for Canadians.

If you need help with your TFSA investments or financial questions about your TFSA allocation, click here to book a free initial consultation with us.

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