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TFSA Contribution Limit Increases to $7,000 in 2024

TFSA Contribution Limit Increases to $7,000 in 2024

January 8, 2024

Tax-Free Savings Account contribution limit increase in 2024, writes Peter Watson.

As of 2024 the annual contribution of a Tax-Free Savings Account has increased to $7,000. To be eligible to contribute a person must be 18 or older and have a social insurance number.

The TFSA was introduced in 2009 and the maximum contribution limit for those eligible to contribute since that year is $95,000. Future contribution increases are based on inflation.

There are many attractive features of a TFSA and for many the most significant is tax savings. All investment earnings are tax free. That includes interest income, dividends, and capital gains.

Plus, all funds withdrawn from a TFSA are tax free. That is different from a Registered Retirement Savings Plan and Registered Retirement Income Fund. All withdraws from an RRSP or RRIF are added to your income and taxed accordingly.

Another benefit of a TFSA is flexibility. If you have not contributed the full amount that you were eligible you can contribute that amount in any year.

Withdrawing funds is allowed and you can re-contribute those funds in the future. The only requirement is you are not able to re-invest in the year you withdrew the funds.

For example, make a withdrawal in September and as of January 1 the following year those funds can go back into your TFSA.

For many Canadians the TFSA is the most tax friendly flexible type of account you can have.

I suggest you consider how a TFSA can be used to your advantage. Do you own investments that are better moved into a TFSA? Is a TFSA better for you to use than a RRSP?

My recommendation is to consider if a TFSA is of benefit and how best it should be used.

Peter Watson, of Watson Investments MBA, CFP®, R.F.P., CIM®, FCSI offers a weekly financial planning column, Dollars & Sense. He can be contacted through www.watsoninvestments.com