TFSA Contributions

Contributions may only be made by the account holder and the amount is not limited to the income of the account holder.

As of January 1, 2016, the contribution limit for 2016 was decreased from $10,000 to $5,500. More information about this change can be found here.

Unused Contribution Room Expand/Collapse

When an account holder contributes less than the maximum allowed the difference is referred to as unused contribution room.

This means that:

  • Unused contribution room will accumulate each year
  • This will also carry forward indefinitely, allowing the account holder to "catch up" by contributing more than the maximum allowed in a future year
  • A withdrawal will increase the contribution room for the year after and when funds are spent from a TFSA they can be re-contributed in the future when the funds become available
  • You can confirm your contribution room at the CRA website here.

Qualified Investments Expand/Collapse

The types of eligible investments are restricted under the Income Tax Act and include:

  • Term deposits and GICs
  • Variable interest savings accounts
  • Mutual funds
  • Publicly traded securities

There are restrictions on holdings in the self-directed TFSA. Check the rules carefully if the investment is an entity in which the account holder has significant interest (generally more than 100%) or where there is a non-arm's length relationship.

Borrowing to Purchase a TFSA Expand/Collapse

Interest on money borrowed to purchase a TFSA is not deductible for tax purposes.

Benefits & Advantages Expand/Collapse

Benefits or advantages based on TFSA holdings, such as merchandise, trips or interest free loans, are subject to a penalty tax. All benefits must go into the TFSA, not to the account holder or a person with whom the account holder is not dealing with at arm's length.