Tax Free Savings Account (TFSA)
There are many advantages to investing in a tax free savings account; the main advantage being that you can save your money tax-free. This money can be withdrawn at any time without being taxed, and it is not considered income earned for the year either.
There is a contribution limit of $6,000 for the tax year 2022 but any unused contribution room from previous years is carried over to the following years. Also, any amount withdrawn is added to your contribution room in the following years.
Eligibility:
- Must be a Canadian resident
- Must be 18 years of age or older
- Must have a Social Insurance Number (SIN)
There is a contribution limit of $6,000 for the tax year 2022 but any unused contribution room from previous years is carried over to the following years. Also, any amount withdrawn is added to your contribution room in the following years.
Eligibility:
- Must be a Canadian resident
- Must be 18 years of age or older
- Must have a Social Insurance Number (SIN)
TFSA vs RRSP
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Tax deduction for contributions Tax-free withdrawals Tax-free growth Annual contribution limit Need earned income to contribute Carry-forward of unused contribution room Contribution room restored after withdrawal Minimum age for contribution Maturity limit Penalty for over-contributions Spousal contributions Impact on government benefits such as OAS and GIS |
TFSANo
Yes Yes $5,500 No Yes Yes Age 18 None 1% per month Not subject to income attribution rules No |
RRSPYes
No Tax deferred until withdrawn 18% of earned income up to an annual maximum (determined annually) Yes Yes No None Age 71 1% per month Income attribution rules apply Yes |