2020 Tax-free savings account limits established

2020 Tax-free savings account limits established

December 12, 2019

The federal government has offered Canadians an extremely attractive tax-free investment option.

A Tax-Free-Savings Account (TFSA) is a way to grow your savings without paying tax on any contributions, interest earned, dividends, or capital gains. 

Many don’t take advantage of this opportunity. I suggest you take some time to see if this investment strategy would benefit you.

The TFSA was established in 2009. Canadians are eligible to contribute to a TFSA the year they turn 18.

The federal government establishes TFSA limits each year. They recently announced the contribution room for 2020 is $6,000, the same as last year’s limit.

Future contribution limits may increase based on the inflation rate and those increases will be made in increments of $500.

If you were 18 years old in 2009 when the TFSA was introduced, and have not yet contributed, your contribution limit, including the year 2020, is $69,500.

Contribution limits are cumulative so you can use past eligible contribution limits at any time.

Also, if you have withdrawn from a TFSA you can recontribute the amount withdrawn. The only catch is you have to wait until the next calendar year to reinvest any amount of the total funds withdrawn the previous year.

Unlike an RRSP, there is no tax deduction for contributions made to a TFSA. However, unlike an RRSP, there is no income tax paid on funds that are withdrawn.

Think of this as a tax gift.

Your investments grow tax-free, and funds withdrawn are also tax-free.

Contributions to a TFSA can be made with one payment or by establishing an ongoing instalment plan. Even a small monthly contribution of $100 can grow steadily over time.

Another contribution option is to look at other non-registered taxable investments that you own. Does it make more sense to transfer money held in these investments into your tax-free TFSA?

TFSA has many benefits and I encourage you to consider incorporating them in the way you invest.


Peter Watson is registered with Aligned Capital Partners Inc. (ACPI) to provide investment advice. Investment products are provided by ACPI.  ACPI is a member of the Investment Industry Regulatory Organization of Canada (IIROC).  The opinions expressed are those of the author and not necessarily those of ACPI. Peter Watson provides wealth management services through Watson Investments.

Watson Investments
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