CRA recently announced that the new TFSA contribution limit for 2023 is set at $6,500- up from $6,000 in 2022 as well as the 3 years prior.
The drive behind this increase is stated to be in part due to inflation.
For someone who has never contributed to their TFSA and has been eligible for the TFSA since it was introduced in 2009; their lifetime contribution limit is set at $88,000.
It's a great time to take advantage of the tax-free features a TFSA provides to investors.
If you have withdrawn money from your TFSA (other than over-contributions) that dollar amount is carried forward and creates contribution room for the next year. The formula for this is stated below;
Unused TFSA contribution room to date + total $ withdrawal made in this year + next year’s TFSA dollar limit = TFSA contribution room available at the beginning of next year
You can also view your available contribution room through your CRA online account or you can contact CRA to find out how much you room you have. (We find this to be the best option for our clients as CRA takes all TFSA's an investor has into account, so you are sure you will not over-contribute.)
When you over-contribute you are subject to a 1% tax penalty monthly until the over-contribution amount is withdrawn. To find out your contribution room speak to your financial institution where you hold your TFSA or contact CRA.
The below chart shows what the contribution limits have been for previous years, you can see this is the highest contribution limit given besides the jump in 2015. It may be a great time to take advantage of the extra room for your money to grow tax-free.
Anyone 18 or older and who has a valid social insurance number is eligible to open a TFSA. Contribution room begins accumulating in the year in which a person turns 18.
Contact us to learn more of the benefits of having a TFSA!
Article of reference: CRA announces TFSA limit for 2023 | Investment Executive
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