The Tax Free Savings Account(TFSA) began in 2009. TFSA is an effective tool for investing tax free. So it is becoming more and more popular among Canadians these years.
Canada residents age 18 or older with a social insurance number can open a TFSA.
Every year the annual contribution limit is different .
The annual TFSA dollars limit for the years 2009,2010,2011,2012 is $5,000; The annual TFSA dollars limit for the years 2013,2014 is $5,500; The annual TFSA dollars limit for the years 2015 is $10,000. On Jan1,2016 the annual contribution turned to &5,500 instead of the $10,000.
You can carry-forward unused contribution room. For example , you open a TFSA today, you can get total $46,500 room in 2016.
If you total contribution exceed your TFSA room, you will get a penalty of 1% month for over contribution.
For example, suppose you have current year’s limit of $5,500, you make a contribution of $5,500 on Jan 1 , and you withdraw $5,500 from TFSA to other account on Feb this year. and then you re-contribute 4,000 on Mar 1 this same year. In this case , you had an excess TFSA amount of $4,000 .The Canada Revenue Agency will give you a over contribution penalty $400 .
Be sure you have enough room to contribute. Don’t do re-contributing and withdrawing in the same calendar year when you have no more room.