Tax-Free Savings Account
Notice to the reader
This measure has received Royal Assent.
1. What is a Tax-Free Savings Account (TFSA)?
A TFSA is a registered savings account that allows taxpayers to earn investment income tax-free inside the account. Contributions to the account are not deductible for tax purposes, and withdrawals of contributions and investment income from the account are not taxable.
2. What proposed changes were announced on December 7, 2015 in respect to the TFSA annual contribution limit?
For 2016, the Government proposes a TFSA annual contribution limit of $5,500. For future years, the TFSA annual contribution limit will be indexed to inflation and rounded to the nearest $500.
3. Will the $10,000 TFSA annual contribution limit for 2015 change?
No. The $10,000 TFSA annual contribution limit remains for 2015.
4. Will the Canada Revenue Agency (CRA) administer the new TFSA annual contribution limit before the law is enacted?
The proposed measure is subject to parliamentary approval. Consistent with its standard practice, the CRA will administer this measure on the basis of the announcement.
5. If I inadvertently over contribute to my TFSA, will I be subject to a tax?
Yes, a tax will apply on over contributions. Where the over contribution is inadvertent and you take immediate action to remove the excess amount, you may apply for relief and your case will be reviewed. You can track your annual TFSA contribution limit easily using the CRA’s My Account secure online self-service portal.
6. Where can I get more information on the change?
The CRA is committed to providing taxpayers with up-to-date information. The CRA encourages taxpayers to check its Web pages often. All new forms, policies, and guidelines will be posted as they become available.
In the meantime, please consult the Department of Finance Canada's announcement for further details.
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