The federal government recently announced the TFSA contribution limits for 2023. This year the limit is $6,500. However, you will have accumulated contribution room every year beginning in 2009, so your contribution limit will be much higher if you haven’t used any or all of that reserved contribution room. The only stipulations for contributing are that you must be 18 and hold a valid Social Insurance Number (SIN).
Frequently Asked Questions
You can’t directly contribute to TFSA for your spouse or your children, but you can give them money to contribute to their TFSAs without the government attributing it back to you. The great thing about this is that your family members just have to be over 18, and they do not have to work or earn income to be eligible for a TFSA. This is a great way to encourage young people to save.
One of the reasons why saving money is so hard is because it is never just about the money. Every single one of us as humans have psychological and emotional feelings wrapped up in our finances.
However, you should be aware that you cannot contribute more than your allowable limit to anyone’s TFSA in any given year. Remember that these contributions are also not tax-deductible for you or your spouse or children. However, you will be providing them with a financial gift that can grow tax-free.
TFSAs come in many forms, from simple savings accounts to GICs and other investments. You can hold almost any type of investment in your TFSA that you can hold in an RRSP, including mutual funds, ETFs, bonds, publicly-traded securities and even some private company shares.
You can hold foreign funds and securities in a TFSA as well. However, these will be converted to Canadian currency on the transaction, so be sure you understand current exchange rates to avoid over-contributing to your TFSA. Some foreign dividend income earned in a TFSA can also be subject to foreign withholding tax so keep that in mind when making these kinds of investments.
Finally, capital losses are not eligible for a tax write-off as they are in other circumstances, so if you lose money on your TFSA investments, you cannot recoup part of the loss with tax savings. Be sure to invest only to the level of risk you can currently tolerate.