3 Things to Know about
Tax Free Savings Accounts (TFSA)
At TCU Financial Group, we’re dedicated to giving you
honest, accurate and up-to-date information that helps you
achieve your financial goals. And as part of this ongoing
commitment, we’re highlighting three key TFSA facts that
are important for you to know.
1. Beware of WHEN you pay back any funds you
withdraw from your TFSA.
Let’s start with this: the maximum amount you can
contribute to your TFSA per year is now $5,500. This
new, higher limit is effective January 1, 2013. From 2009 to
2012 this limit was $5,000.
So based on the contribution limit, let’s say you deposit $5,500 into your TFSA on January
1st. And then on March 1st you withdraw $3,000. This “frees up” $3,000 in contribution room.
Now, you may think that putting that money back into your TFSA is as simple as making a
$3,000 deposit sometime in during the year. That would take you back to $5,500, which is the
annual limit. Makes sense, right?
Unfortunately, the answer is no. According to the Canada Revenue Agency, you’ll have
contributed $8,500 – the $5,500 you contributed in January and the $3,000 you contributed
later in the year. In other words, the CRA doesn’t recognize withdrawn amounts when it
calculates your annual contribution total.
As a result of the over-contribution, the CRA may penalize you 1% for each month the excess
contribution stays in your account.
What can you do to avoid all of this? The answer may not be all that logical, but it’s simple: if
you withdraw funds from your TFSA, don’t put them back until the following year. So in the
scenario above, you wouldn’t put the $3,000 that you withdrew from your TFSA back into
your account until next year (or any year after that).
2. You can invest your TFSA in a variety of ways – not just a savings account.
By virtue of having the words “Savings Account” in the term “Tax Free Savings Account,” some
people believe that the only investment they can have with a TFSA is the SA part (“Savings
Account”). But that’s not the case at all!
You can have a wide variety of investments in your TFSA. Talk to our knowledgeable advisors
here at TCU Financial Group to learn more about your TFSA investment options.
3. You can carry unused TFSA contribution room forward.
Thankfully, contributing to your TFSA is not a “use it or lose it” thing. In other words, if you
don’t maximize your contribution during any given calendar year, you will be able to carry
that unused amount to the next year, the year after…and so on.
For example, let’s say that in 2009 (when TFSAs launched) you deposited $1,500 into your
TFSA and haven’t made a contribution since. That means in 2013 you’ll be able to contribute:
•
•
•
•
•
$3,500 for 2009
$5,000 for 2010
$5,000 for 2011
$5,000 for 2012
$5,500 for 2013
Add it all up, and you could contribute $24,000 to your TFSA in 2013
TFSA Questions? Contact Us Today!
TFSAs are a great way to boost your savings and help you keep more of your money. At
TCU Financial Group, our knowledgeable advisors are here to answer all of your questions
and help you make an informed decision when choosing the right TFSA investment for you.
Contact us today.