7 Ways That You Can Do So
1. As of April 21, 2015, the cumulative contribution limit is $41,000.
2. All income and capital gains made in a TFSA are tax free, hence the name Tax Free Savings Account. This is the feature of TFSAs that is most attractive. For instance, if you buy stocks in your TFSA that cause it to balloon from $36,500 to $50,000, the $13,500 capital gain is tax free! The only downside is if you have any capital losses, they can’t be claimed.
3. You can put almost anything you like inside a TFSA, i.e. Stocks, bonds, mutual funds, hedge funds etc. Because anything you gain in a TFSA is tax free, it makes sense to put your more aggressive, or higher paying dividend securities in your TFSA.
4. Withdrawals from a TFSA are Tax Free and unused TFSA contribution room can be carried forward.
5. Full amounts of withdrawals can be put back into your TFSA in following years. They key point here being that it MUST be in the following year. If you replace a withdrawal in the same year you will be subject to a very expensive penalty tax. You will also be charged a penalty tax if you over contribute at all in any year.
6. Get your TFSA contribution in early so your contribution can work all year long for you. If you wait until part way through the year to contribute, say July, then your $5,500 will be sitting in a fully taxable environment for 7 months of the year, rather than in a tax shelter.
7. If you can’t get your TFSA maxed out each year at the start of the year, still work hard at contributing towards it all year long. Not only for the tax benefits, but because it’s a great way to save for short term and long term goals, like a house, due to its tax free withdrawals, and the ability to replace those withdrawals in following years.
For most of you reading this, you have unused contribution room in your TFSA that’s just sitting there; or, you could be completely mind-boggled. Either way, give us a call or drop us a note and we’ll be happy to help you out.