Answer
Stay informed about the latest TFSA updates and contribution limits to maximize your tax-free savings. Understanding these changes is crucial for effective financial planning and ensuring you’re making the most of this powerful investment tool. KWB is here to help you navigate these updates and optimize your TFSA strategy.
Overview
This article details the latest TFSA updates and how they impact your financial planning. It covers specific considerations for residents in Edmonton, Alberta, ensuring you have relevant information for your savings strategy.
The content also includes a labeled real-world hypothetical to illustrate how these changes can affect individual financial situations.
- Local Impact: Discover how recent TFSA updates apply to individuals in Edmonton.
- Common Questions: Find answers to frequently asked questions about TFSA rules and contributions.
TFSA Updates: What Edmontonians Need to Know
Find updates related to TFSAs and RRSPs from 2026 here.
In 2009 the Government of Canada introduced the “Tax-Free Savings Account (TFSA) as a flexible, registered, general-purpose savings vehicle that allows Canadians to earn tax-free investment income to more easily meet lifetime savings needs”.
The TFSA contribution is done with after-tax dollars, so unlike an RRSP contribution it is not tax deductible. However, no tax is payable on any growth or investment income earned in a TFSA. Withdrawals from the account are not a taxable event either. In fact, any funds withdrawn from the account can be re-contributed in a future year. Take care though, that this “re-contribution” of withdrawn funds does not occur until the following calendar year at the earliest, or a CRA penalty may result.
TFSAs are available to every Canadian resident at least 18 years of age. The annual contribution limit was introduced at $5,000 in 2009, and is indexed to inflation and rounded to the nearest $500 every year. This indexing didn’t have any impact until 2013 when the annual contribution limit was increased to $5,500. In 2015 the TFSA limit was increased to $10,000 but then reduced back to $5,500 in 2016 and has remained at that level since then. The cumulative TFSA limit from 2009 to 2018 now sits at $57,500.
Any unused contribution room can be carried forward, starting from the 2009 inception date onward. This means that if you’ve never previously contributed to a TFSA, then in 2018 you could make a total deposit of $57,500. As you can imagine, not having to incur tax on investment growth/income on an account of this size could provide meaningful tax savings in any given year depending on investment performance.
For example: John opened his TFSA in 2014, and diligently invested $5,000 in it each year until 2017. By November of 2017, his investments had done well and grown to $24,000 and John decided to withdraw all of these funds to buy a new car. As luck would have it, in June of 2018 John then received a large inheritance from a long lost uncle. His accountant has confirmed that not only does John owe no tax due to the $4,000 growth on his TFSA assets and the withdrawal in 2017, but he can now make a TFSA contribution in 2018 of $61,500. ($24,000 that can be re-contributed plus $37,500 for past contribution room)
A TFSA can be easily set up with virtually any major financial institution in Canada. Depending on the institution, and the preferences and risk tolerance of the contributor, these funds can be used to purchase a wide variety of investments within the TFSA, including (but not limited to) stocks, bonds, mutual funds and GICs.
There is little doubt that the TFSA is a positive financial opportunity for a great many Canadians. However, the overall financial benefit is very much dependent on one’s personal financial circumstances and tax situation, so please consult your tax or financial advisor prior to moving forward.
If you would like to contact us to discuss TFSA’s or other investment opportunities in further detail please call us at 780-466-6204 or click here to email us.
Thanks to Darren Buma of KWB Chartered Professional Accountants for contributing to this article.
FAQ
To help you navigate the latest TFSA updates and understand their implications, we’ve compiled answers to some common questions.
| Question | Answer |
|---|---|
| What is the current annual TFSA contribution limit for Edmonton residents? | The TFSA contribution limit is uniformly set annually by the Canada Revenue Agency (CRA) for all Canadians, including Edmonton residents. Staying updated on these limits is vital to maximize your tax-free savings and prevent over-contribution penalties. |
| How do TFSA updates specifically benefit KWB Accountants & Advisors clients in Edmonton? | TFSA updates, such as changes to contribution limits, directly benefit KWB clients in Edmonton by expanding their ability to save and invest tax-free. These adjustments allow individuals and families across Edmonton to maximize their tax-sheltered growth for various financial goals, from homeownership to retirement planning, without incurring local or provincial taxes on their investment gains. |
| What types of investments can be held within a TFSA in Edmonton? | In Edmonton, a TFSA can hold various investment products like mutual funds, stocks, bonds, GICs, and ETFs. The ideal choices for your TFSA in Edmonton will align with your personal risk tolerance and financial objectives. |
| Do Edmonton residents need to report their TFSA contributions to the Canada Revenue Agency? | No, Edmonton residents do not need to report their TFSA contributions on their annual tax return. Financial institutions in Edmonton report this information directly to the Canada Revenue Agency (CRA). It remains crucial for you to personally track your contributions to avoid exceeding your annual limit. |