Article written by Jennifer Black and Dedicated Financial Solutions.
TFSA Limit Increase for 2013
As of April 24, 2015, Canadian residents 18 and older (19 in some provinces and territories) may expect to contribute up to $10,000 to their TFSA per year (as part of the 2015 Federal Budget Economic Action Plan, this measure is subject to parliamentary approval)*
CRA has announced that they are increasing the Tax Free Savings Account (TFSA) contribution limit for 2013 to $5,500 from the previous $5,000 in the previous 4 years. If you have non registered investments you should move as much of it over as you can, based on your contribution limit, to a TFSA. This will allow you to receive interest, dividends etc. tax free on those assets. You do not need to sell those assets to move them over, you can transfer in-kind from your non registered account to your TFSA. If you have never contributed to a TFSA, you can catch up by contributing $25,500 in 2013.
How do previous withdrawals affect your limit? When money is withdrawn from a TFSA, it can be recontributed in the following calendar year without affecting future limits. As an example, Jack had maximized his contributions by contributing $20,000 to his TFSA from 2009 to 2012. In June of 2012 he withdrew $4000 to do some home renovations. In 2013 he can replace the $4000 plus make the $5,500 contribution. He would have been penalized for over contributing if he had replaced the $4000 in 2012. The penalty for over contributing is 1% per month of the over contributed amount.