Introduced in 2009, the Tax Free Savings Account (TFSA) enable Canadians who are 18 years of age or older to save and invest money tax-free during their lifetime – either for retirement or for any other purpose.

Contributions to a TFSA are not deductible for income tax purposes. However, any amount contributed as well as any income or capital gains generated in the account are tax-free, even when withdrawn.

An individual can 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.

  • The TFSA new contribution limit for 2020 is $6,000, matching the amount set for 2019
  • The total contribution room available this year for someone who has never contributed and has been eligible for the TFSA since its introduction is $69,500.
  • The annual TFSA dollar limit is indexed to inflation and rounded to the nearest $500. The Canada Revenue Agency’s indexation increase for 2020 is 1.9%.
  • Anyone 18 or older and who has a valid social insurance number is eligible to open a TFSA. Contribution room accumulates beginning in the year in which a person turns 18.

For clients who have withdrawn from TFSAs, their crystallized gains and losses from withdrawals are factored in to their TFSA room. Here’s the formula:

  • Unused TFSA contribution room to date + total withdrawal made in this year + next year’s TFSA dollar limit = TFSA contribution room at the beginning of next year

TFSA annual dollar limits

For 2009, 2010, 2011 and 2012:         $5,000

For 2013 and 2014:                                $5,500

For 2015:                                                $10,000

For 2016, 2017, and 2018:                    $5,500

For 2019 and 2020:                               $6,000

Federal tax bracket thresholds for 2020

The 33.0% tax rate begins at taxable income of over $214,368, up from $210,371 in 2019 The 29.0% tax rate begins at taxable income of over $150,473, up from $147,667 in 2019 The 26.0% tax rate begins at taxable income of over $97,069, up from $95,259 in 2019 The 20.5% tax rate begins at taxable income of over $48,535, up from $47,630 in 2019 The basic personal amount for 2020 is $12,298, up from $12,069 in 2019

MP, DB, RRSP, DPSP, and TFSA limits and the YMPE *Government of Canada

These tables outline the annual money purchase (MP), defined benefit (DB), registered retirement savings plan (RRSP), deferred profit sharing plan (DPSP) and the tax-free savings account (TFSA) limits, as well as the year’s maximum pensionable earnings (YMPE).

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