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What is TSFA?
A Tax Free Savings Account (TFSA) is a registered investment or savings account that allows for tax free gains. The amount of money that can be contributed to a TFSA is limited each year. A TFSA can be used for any savings goal and withdrawals can be made free of tax.
From 18-year-olds to all, anyone can open a TFSA account.
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. TFSAs are considered tax-exempt. While contributions to a TFSA earn you no immediate tax breaks like RRSP contributions would, you will however receive big breaks in the future, since all investment gains will not be subject to any taxes. In other words, since you already paid tax on the money you put into your TFSA, you won’t have to pay anything when you take money out.
Maximum Contribution Limit for TFSA
The annual limit of contribution to Tax-Free Savings Accounts is set at $5,500 for 2018. The maximum limits for savings in the TFSA account keeps changing. The maximum contribution limit from 2009 to 2012 was $5,000 and $5,500 respectively. For the years 2015 and 2016 it limit was $10,000 and $5,500 respectively. In case the candidate withdraws the amount from TFSA account, the amount withdrawn is added to your contribution room in the next calendar year.
You cannot open a TFSA account until you turn 18. The eligible legal age for the individuals can enter into a contract is 19 in certain provinces and territories.
The Tax-Free Savings Accounts isn’t prorated in the year an individual turns 18 or dies or becomes a resident or a non-resident of Canada.