Remember Your TFSA This RRSP Season

Your Annual Contribution Limit Is Cumulative

January 5, 2017

The RRSP contribution deadline for the 2016 tax year is March 1, 2017. While finalizing your finances for the year, remember to top up your Tax Free Savings Account (TFSA) – especially if you have already maxed out your RRSP contribution.

Your TFSA’s annual contribution limit is cumulative, meaning any unused portion is carried over to the following year. As of January 1, 2017, that cumulative total is $52,000. This money doesn’t have to just sit there; your TFSA can be structured to invest in most of the same vehicles as your RRSP, including bonds, mutual funds, and stocks. Any interest, dividends, and capital gains earned from your TFSA are tax-free for life.

Although your TFSA contribution is not tax deductible, any withdrawals are tax-free. You may make a withdrawal at any time, and that amount is automatically added to your annual contribution limit the following year. TFSAs are especially attractive for estate planning as there is no upper age limit to contribute and the account can be transferred tax-free to a spouse.

The primary concern to keep in mind is ensuring you never over-contribute to your TFSA. This can incur potentially costly penalties, especially if the excess amount was deposited intentionally or is not promptly withdrawn.

If you have any questions please give us a call at 604 691-7209.