TFSA

The limit is $6,000 in 2021. But the amount you can save depends on your personal TFSA contribution room.

Your TFSA contribution room starts building up from the year you turn 18 or when the Government of Canada first introduced TFSAs, which was in 2009.* This means if you’ve never put money into a TFSA before, your contribution limit could be as much as $75,500 (in 2021).

The best way to find out how much money you can contribute to your TFSA is through ‘My Account’ on the Canada Revenue Agency (CRA) website.

*You can contribute to a TFSA only for the years you are a legal resident of Canada.

The annual TFSA limit for 2021 is $6,000.

The federal government may change the TFSA contribution limit from year to year. Although that limit increase has varied, it’s generally increased in line with inflation.

Then you might be able to deposit a total of up to $75,500.

Remember, any unused TFSA contribution room automatically rolls over from one year into the following year.

You automatically carry forward unused contribution room to future years.

Only if you’ve been a non-resident of Canada for an entire year - during which time you won’t have earned any contribution room.  

You can usually withdraw any amount from your TFSA. It may take a few days to withdraw your money, depending on your investment.

You can withdraw money whenever you want, for any purpose. However, you’ll want to check if the product (insurance GIC, trust GIC, segregated fund, mutual fund) you’ve invested in has any withdrawal restrictions or penalties prior to withdrawing funds.

Just remember that the specific terms of the investments you hold in a TFSA could mean it’ll take a few days for you to receive your money.

The amount you withdraw is added to your contribution room in the next year, in addition to the annual maximum. If you’ve carried unused contribution room forward from previous years, you may be able to add more than the annual maximum.

Yes, you can. But not until the next year.

Each time you deposit funds it counts as a contribution – no matter the total amount in the account. So lets say you deposit $1,000 and then withdraw it and deposit $1,000 again later in the same year. Then you’re considered to have contributed $2,000.

Then you may trigger an accidental over-contribution.

Over-contributions may lead to tax penalties from the CRA. Making a transfer avoids that problem. An advisor can help you with this.

Don't make more deposits in a calendar year than the annual limit, which is $6,000 in 2021. If you know you have additional room, however, you can add up to your maximum contribution limit.

If you've already maxed out your TFSA contribution room, you still have options. Consider contributing to an RRSP to boost your retirement savings instead.

There are many clever ways to make the TFSA and RRSP work together to improve your wealth. As a general rule, RRSPs are a good choice for longer-term goals such as retirement. But TFSAs work better for more immediate objectives, such as a new home or a car.

Take a look these comparisons to understand the differences between a TFSA and RRSP.

Then you may consider getting a non-registered account. These are taxable accounts that allow Canadians to hold a variety of investments – with no contribution limits.

Unlike a TFSA, you’ll be taxed on any money and investment growth you have within a non-registered account.

Yes. You can use the funds in your TFSA for any reason, including paying for a down payment on a new house or home.  

The main difference is that you make your TFSA contributions with after-tax dollars whereas your RRSP contributions are tax-deferred. This means you can withdraw funds from your TFSA for any reason (like buying a house) and at any time and your withdrawals are tax-free, while RRSP withdrawals require you to pay tax. However, instead of withdrawing from your RRSP, you can borrow from it. With the federal government's RRSP Home Buyers' Plan, you can use up to $35,000 of your RRSP savings ($70,000 for a couple) to help pay your down payment on a house or home. But keep in mind that the RRSP Home Buyers’ Plan is a loan that you’ll have to pay back within 15 years. Otherwise, you’ll have to pay the taxes on the amount you withdrew from your RRSP.  Talk to an advisor to find out what works best for you.

For the 2022 Federal Budget, the Canadian government announced that they’re creating a new Tax-Free First Home Savings Account (TFFHSA) to help Canadians save for the cost of a down payment.

The TFFHSA will be available in 2023 to any Canadian who’s over the age of 18 and is also a Canadian resident. They’ll be eligible to open a TFFHSA if they haven’t lived in a home they owned in the current year or during the past four calendar years.  TFFHSA contributions will be tax-deductible. This means you can subtract these contributions from your taxable income, which will reduce the amount of tax you’ll have to pay overall.

And, like a TFSA, investment growth and withdrawals from a TFFHSA will be tax-free. That’s provided you use your withdrawals for the purpose of buying a house or home.

Please remember that the TFFHSA won’t be available until 2023. We’ll provide updated information when this happens. In the meantime, you can connect with a Sun Life advisor to find out how you can start saving up money to buy a house.