TFSA
The TFSA is a unique registered savings vehicle that allows for tax-free growth and withdrawals of invested capital and associated income. However, for incorporated business owners, having the funds to contribute to a TFSA will often come at a cost of upfront personal tax as dividends need to be paid out from their corporations, which otherwise could have been retained and invested within the corporation.
The TFSA was introduced in 2009 as a registered savings vehicle providing a limited amount of contributions, with unused contribution room being available to carry forward. Only individuals can fund a TFSA, and while contributions are not tax-deductible, investment income and gains realized in the account, as well as withdrawals, are tax-free. Furthermore, withdrawals from a TFSA can be recontributed in the following calendar year.
For Canadian residents, TFSA contribution room accumulates annually by a dollar limit, allowing for additional savings. The TFSA dollar limit for 2021 is $6,000. For individuals who were at least age 18 in 2009, have always been resident in Canada, and have never contributed to the TFSA, the cumulative contribution room in 2021 is $75,500.
More information on the TFSA is available in our “Tax-Free Savings Account” education article. Please contact your Richardson Wealth Investment Advisor for a copy.