Tax-Free Savings Account (TFSA) GUIDELINES FOR 2021

The Canada Revenue Agency (CRA) has announced a new TFSA ( tax-free savings account ) limit for 2021.

For many, this news fell on deaf ears as the TFSA has been underutilized by Canadians for many years.

The first question to ask is “What is a TFSA?”

The simple answer is: A TFSA is a registered investment or savings account that lets your money accumulate tax-free.

It’s an account that does not apply taxes on investment gains such as, interest earned, dividends, or capital gains. It allows your funds to accumulate tax-free.

An added bonus to this account is that you won’t be taxed on withdrawals like a standard RRSP. This allows you to make a withdrawal at any time without being penalized.

It’s important to note that a TFSA is not the best place to hold your money as it gains very little interest. What makes the TFSA popular is the fact that since you paid tax on the money you put into your TFSA, you won’t have to pay anything when you take money out.

There are limits on how much money you can have in a TFSA. Thankfully, this limit has gone up in the last 3 years to $6000 per person.

This total ($6000) can be added to if you did not contribute the maximum amount in the years since 2009. Keep in mind that withdrawals are taken into account.

If you’re a Canadian over 18 with a Social Insurance number you are eligible to open a TFSA account.

Talk to any bank or financial institution to start one.

Starting a TFSA depends entirely on your situation and many prefer putting their money into RRSP’s. Talk to a financial advisor to determine what is best for you.

There are a few rules you need to follow to maximize this benefit.

Because this account allows you to withdraw funds at any time, be aware of some of the guidelines you need to follow.


Brayden was eager to open his TFSA, but he didn’t turn 18 until December 21, 2018. On January 4, 2019, he opened a TFSA and contributed $11,500 ($5,500 for 2018 plus $6,000 for 2019 – the maximum TFSA dollar limits for those years). On the advice of his broker, he had opened a self‑directed TFSA and invested in stocks that increased in value. By the end of 2019, the value in Brayden’s TFSA had increased to $12,300. Brayden was worried that for 2020, he would only be able to contribute $5,200 (the TFSA dollar limit of $6,000 for 2020 less the $800 increase in value in his TFSA through 2019). Neither the earnings generated in the account nor the increase in its value will reduce the TFSA contribution room in the following year, so Brayden can contribute up to $6,000 in 2020 to his TFSA.

Don’t over contribute because these funds will be subject to be taxed at a 1% penalty per month as long as the excess amount remains in your account.



For more detailed information on TFSA visit: Tax-Free Savings Account (TFSA), Guide for Individuals

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