What is a TFSA?
A TFSA allows you to set money aside in eligible investments and watch those savings grow tax-free throughout your lifetime. Interest, dividends, and capital gains earned in a TFSA are tax-free for life. Your TFSA savings can be withdrawn from your account at any time, for any reason1, and all withdrawals are tax-free.
Advantages of a TFSA
A TFSA is what’s often referred to as a “tax-advantaged account,” meaning the government provides tax breaks for those who use them as an incentive for saving for retirement or some other large purchase like a home
Flexible withdrawal options. You can take out as much as you want, whenever you want, without penalty
Limitations of a TFSA
Over-contribution (i.e., put in more money in a calendar year than you’re allowed by law), will be charged a penalty of 1% per month on the amount in your TFSA that is in excess of the limit.
TFSA contribution limits
This year TFSA contribution limit for 2020 is $6,000. The lifetime limit for 2020 is $69,500.
Qualifying Investments
Qualifying investments are similar to RRSP’s; including cash, deposit accounts, mutual funds, bonds, and publically traded securities. You may also own shares inprivately held corporations subject to restrictions.
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