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 Money withdrawn in a year can only be reimbursed in the following year, and unused TFSA contribution room can be carried forward.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 The Canada Revenue Agency (CRA) imposes a one percent monthly penalty until the excess is withdrawn.
TFSA 2023 Overview
|Name of Program
|Tax-Free Savings Account
|New contribution limit 2024
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.