Starting January 1, 2016, the annual TFSA dollar limit decreased from $10,000 to $5,500 and will be subject to indexation. The TFSA contribution limit for 2018 will remain $5,500. This is since the indexation adjustment for personal income tax and benefit amounts is 1.5% for 2018, which is not enough to raise the TFSA limit to the next $500 increment.

In 2017, inflation has fallen as evidenced by the Consumer Price Index falling from 2.1% in January to 1.4% in October 2017, and reaching a low of 1% in June.

Tax Free Savings Accounts (TFSAs) were introduced by the federal government in 2009. Canadian residents who are 18 years of age or older with a valid Canadian social insurance number can set money aside tax-free during their lifetime by contributing to a TFSA.

Contributions to a TFSA are not deductible for income tax purposes. However, any income generated in the account (for example, investment income and capital gains) is generally tax-free, even when it is withdrawn.

An individual can only contribute up to their TFSA contribution room. Unused TFSA contribution room can be carried forward to later years. The total amount of TFSA withdrawals in a calendar year is added to the TFSA contribution room for the next calendar year. If you have never contributed to a TFSA, in 2018 you can contribute a total of $57,500 to your TFSA account.

If you have investments in non-registered accounts, you can transfer these investments in-kind to your TFSA, up to your allowable contribution limit and ensure tax free growth of these investments going forward. The in-kind contribution is considered a disposition for tax purposes and will result in a capital gains or loss, so discuss the tax consequences with your financial advisor before proceeding with this strategy.



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