2024 TFSA Contribution Limit – Your Complete Guide

Updated on February 23, 2024

Due to high inflation rates, the TFSA (Tax-Free Savings Account) contribution limit for 2024 has increased to CAD 7,000, raising the total contribution room to CAD 95,000. It’s a good idea to consider adding strong equities to your portfolio now, given the expected volatility in the equity markets due to the current economic conditions.

You can invest in growth and dividend stocks within a TFSA, as any returns in the form of dividends or capital gains are shielded from taxation by the CRA. The TFSA yearly contribution limit was CAD 6,500 in 2023, and any unused contributions from a year can be carried forward to the following year.
Your contribution room in a Tax-Free Savings Account (TFSA) is determined by the total withdrawals from the previous year, any unused contribution room carried over from prior years, and the current year’s contribution limit. This cumulative amount sets the maximum you can deposit into your TFSA. Now, let me provide you with the updated TFSA limit for 2024 and explain how TFSAs function in Canada.

TFSA 2024 Contribution Cap

In 2009, Canada introduced the Tax-Free Savings Account (TFSA) for individuals aged 18 and above, enabling them to invest and save money tax-free for various purposes, including retirement. Even though TFSA contributions are from after-tax funds, both the earnings and profits within the account are tax-free upon withdrawal. The annual contribution limit is set and adjusts with inflation.
The 2024 limit is set at CAD 7,000, rounded to the nearest CAD 500, aligning with inflation. Money withdrawn in a year can only be reimbursed in the following year, and unused TFSA contribution room can be carried forward. If you contribute more than the maximum, it’s considered an over-contribution. The Canada Revenue Agency (CRA) imposes a one percent monthly penalty until the excess is withdrawn.

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TFSA 2023 Overview

Name of Program Tax-Free Savings Account
Organization CRA
Country Canada
Category Finance News
New contribution limit 2024 CAD 7,000
Official Website canada.ca

 

What does TFSA (Tax-Free Savings Account) mean?

Discover the Tax-Free Savings Account (TFSA): Your Gateway to Tax-Advantaged Earnings

A TFSA is a special savings account that lets you grow your money without worrying about taxes. Think of it as a basket where you can stash eligible investments, offering the potential for tax-free interest, capital gains, and dividends. Whether you’re saving for your dream wedding, a rainy day, your first house, or an exciting trip, a TFSA can be a valuable tool. We’ll guide you through what a TFSA is, how it works, and how it can enhance your savings strategy to kickstart your financial journey.

TFSA 2024 Contribution Cap Overview

The 2024 contribution has increased by CAD 500, reaching CAD 7,000 compared to the 2023 limit. For someone eligible for TFSA since its start and never contributed, the total room for 2024 is CAD 95,000. The yearly cap is rounded to the nearest CAD 500 and adjusts for inflation. Anyone 18 or older can open a TFSA, and contribution room begins accumulating at age 18.

TFSA Contribution Limits 2009-2024

Year TFSA Annual Limit TFSA Cumulative Limit
2009 CAD 5,000 CAD 5,000
2010 CAD 5,000 CAD 10,000
2011 CAD 5,000 CAD 15,000
2012 CAD 5,000 CAD 20,000
2013 CAD 5,500 CAD 25,500
2014 CAD 5,500 CAD 31,000
2015 CAD 10,000 CAD 41,000
2016 CAD 5,500 CAD 46,500
2017 CAD 5,500 CAD 52,000
2018 CAD 5,500 CAD 57,500
2019 CAD 6,000 CAD 63,500
2020 CAD 6,000 CAD 69,500
2021 CAD 6,000 CAD 75,500
2022 CAD 6,000 CAD 81,500
2023 CAD 6,500 CAD 88,000
2024 CAD 7,000 CAD 95,000

 

2024 Canada TFSA Limit

One exciting highlight for Canadian savers and investors each year is the fresh TFSA room available on January 1st. The 2024 TFSA contribution limit is set at CAD 7,000, compared to the previous year’s CAD 6,500. When the TFSA was established in 2009, the initial annual maximum was CAD 5,000.

Now, to simplify matters, the limit is annually adjusted for inflation and rounded to the nearest CAD 500. There was a temporary increase to CAD 10,000 in 2015, but it later reverted to CAD 5,500, except for that one exception. Starting January 1, 2024, individuals born in 1991 or earlier, who haven’t contributed to a TFSA, could have a cumulative contribution room of CAD 95,000.

Understanding TFSA in Canada

Deposits into a TFSA grow completely tax-free, accommodating a variety of investments such as equities, bonds, GICs, and more, all enjoying tax-free status within the account. Withdrawals can be made at any time without incurring withdrawal taxes, unlike an RRSP, allowing flexibility to take out any amount whenever needed. The contribution room is replenished the following year, with any withdrawals adding to the contribution room for the next year.

The Government of Canada sets the maximum annual contribution for TFSA holders. This limit, known as the contribution limit, is applicable to each individual. Starting at the age of 18, Canadian residents accumulate contribution room throughout the calendar year. If you contribute less than the maximum allowed in a year, the remaining amount is carried over and added to your contribution room for subsequent years.

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