7 points to consider
1. As of January 1, 2019, the cumulative contribution limit is $63,500.
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 $63,500 to $70,000 the $6,500 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 etc. Because anything you gain in a TFSA is tax free, it can make 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. The 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 $6,000 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 early each 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, due to its tax-free withdrawals, and the ability to replace those withdrawals in following years.
Give us a call or drop us a note and we’ll be happy to help you out with your TFSA.