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2018 TFSA maximum contributions stays the same

2018 TFSA maximum contributions stays the same

March 22, 2018

The Tax-Free Savings Account (TFSA) contribution limit for 2018 remains at $5,500.

Introduced by the federal government in 2009, the TFSA provides a flexible tax-free method of saving. However, a TFSA is more than a savings account. It is an investment account where you don’t pay tax on the capital gains.

To be eligible you must be 18 years or older, a Canadian resident, and have a valid social insurance number.

If a you have maximized TFSA contributions in the past, this year’s contribution is $5,500.

Contribution room in a TFSA can be carried forward. If you have been eligible to contribute since 2009, but haven’t, your total contribution amount is now $57,500.

If you haven’t maximized your contributions in the past, the contribution room previously available can be made this year plus the 2018 contribution of $5,500.

A strong TFSA feature is the ability to re-contribute funds withdrawn in previous years. However, you cannot withdraw and re-contribute to your TFSA in the same calendar year.

The method of calculating this year’s TFSA contribution is fairly simple.

Assume you maximized your TFSA contributions in the past, but last year withdrew $10,000. You can contribute this year’s limit of $5,500 plus the $10,000 that you withdrew last year.

There are a few common mistakes investors make concerning a TFSA.

Not starting a TFSA is the first mistake. Having the ability to use a flexible and tax-free method of saving provides many benefits. Not to use those benefits is a mistake.

You don’t pay taxes on income earned on your TFSA investments. Paying more taxes than are required is a mistake.

Also, not investing your money for growth is a mistake. Holding cash or some other fixed income investment that pays a very low interest rate within a TFSA is not taking advantage of the valuable tax-free benefits.

 

 

Peter Watson is an agent of, and securities products are provided by, Aligned Capital Partners Inc. (ACPI).  ACPI is a member of the Investment Industry Regulatory Organization of Canada (IIROC) and the Canadian Investor Protection Fund (CIPF).  The opinions expressed are those of the author and not necessarily those of ACPI. Peter Watson provides wealth management services through Peter Watson Investments