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1. Tax-Free Growth: Investments held within a TFSA grow tax-free. This means you do not pay taxes on any interest, dividends, or capital gains earned within the account.
2. Contribution Limits: The annual contribution limit for TFSAs is set by the government and accumulates each year. As of 2024, the annual contribution limit is $6,000. Unused contribution room can be carried forward to future years.
3. Withdrawals: You can withdraw funds from your TFSA at any time without paying taxes or penalties. The amount withdrawn is added back to your contribution room in the following calendar year.
4. Types of Investments: TFSAs can hold various types of investments, including cash, stocks, bonds, mutual funds, and Guaranteed Investment Certificates (GICs), among others.
5. Eligibility: To open and contribute to a TFSA, you must be a Canadian resident who has reached the age of majority in your province or territory (which is typically 18 or 19 years old).
6. Unused Contribution Room: If you do not contribute the maximum amount allowed in a given year, the unused contribution room is carried forward indefinitely. This allows you to catch up on contributions in future years.
7. Tax Implications: Contributions to a TFSA are not tax-deductible, meaning you do not receive an immediate tax benefit for contributing. However, income earned within the TFSA and withdrawals are tax-free.
8. Over-Contribution: Be cautious not to over-contribute to your TFSA, as penalties may apply. The CRA sets strict penalties for exceeding your contribution limit.
TFSAs are flexible accounts that can be used for short-term savings goals, retirement planning, or any other financial objectives. It's important to consider your individual financial situation and goals when deciding how to use your TFSA contribution room effectively.
