April 1, 2021
There are basic uses for the Tax-Free Savings Account (TFSA) for investment planning purposes. Some may have advantages for your planning:
- Retirement planning. TFSAs can benefit individuals who are looking to invest in their retirement but are unable to contribute to RRSPs for various reasons. Unlike the Retirement Savings Plan (RRSP) the TFSA will not be taxed when monies are withdrawn. Talk to your advisor about contributions allowed and updating legislation info.
Annual TFSA Limits TFSA contribution investment room per year, per person over the age of 18:
- 2009 to 2012: $5,000
- 2013 and 2014: $5,500
- 2015: $10,000
- 2016 to 2018: $5,500
- 2019 to 2021: $6,000
If a TFSA has not been yet used, your cumulative investment room is $75,500 per person. Contributions are not deductible from your taxable income, thus it is a good place to invest an inheritance.
- Education planning. Both the traditional Registered Education Savings Plan (RESP) and the TFSA can be used as an educational savings vehicle. A TFSA offers parents another tax-efficient method for this investing.
- Income splitting with spouses and children (over 18). TFSAs go beyond normal attribution rules, which offer income splitting to high-income spouses and partners and children over 18 years old.
- Estate planning. Individuals can name surviving spouses and partners as successor account holders, ensuring the tax-free status of a TFSA will continue after death.
Source: CRA
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