Talking about tax-free savings accounts may be the financial equivalent of watching paint dry, but like a purchasing a fine piece of art, TFSAs can be a wise choice for anyone looking to grow their hard-earned cash.
If you’ve never heard of it or have been sitting on the fence for the last eight years, you may be missing out on up to $52,000 in tax-free savings.
Simmer down, Scrooge McDuck. It’s not like opening an account this minute would unlock a treasure trove of thousands of loonies.
Under a TFSA, you can currently contribute $5,500 a year in savings and don’t have to report any income made off interest. What newcomers should know is the amount you can contribute is cumulative since the start of the program. So currently, if you’ve never used it and were at least 18 in 2009, you can squirrel away up to $52,000, tax-free.
You can also make withdrawals from a TFSA without any penalty and that same amount counts towards your contribution room of the next calendar year.
TFSA Contribution Limits Per Year
Speaking of contribution room, the feds set a cap every year. Some years it’s been $5,000 and at one point it was as high as $10,000. For anyone who’s had a TFSA since 2009, these limits are important as there’s a one per cent penalty against how much you’ve over contributed.
Say you accidentally topped off your TFSA by an extra $500 for 2017. You’d then have to pay $5 a month until that $500 is paid off.
Now that you know the basics, how can you get the most out of a TFSA? Check out the video above for some helpful tips.
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Author: Brian Vinh Tien Trinh