About the tax-free savings account (TFSA)
In 2009, the federal government introduced a savings vehicle called the tax-free savings account (TFSA). The TFSA allows Canadian residents who are 18 years of age or older with a valid Canadian social insurance number to set money aside tax-free during their lifetime.
Contributions to a TFSA are not deductible for income tax purposes. However, any amount contributed as well as any income generated in the account (for example, investment income and capital gains) is generally tax-free, even when it is withdrawn.
An individual can only contribute up to their TFSA contribution room. Unused TFSA contribution room can be carried forward to later years. The total amount of TFSA withdrawals in a calendar year is added to the TFSA contribution room for the next calendar year.
Under proposed legislation, starting January 1, 2016, the annual TFSA dollar limit for 2016 will decrease from $10,000 to $5,500 and will be subject to indexation.
To find the yearly TFSA dollar limit, go to MP, DB, RRSP, DPSP, and TFSA limits and the YMPE.
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