Tax Free Savings Account (TFSA) were introduced in 2009 to as a way Canadians 18 years of age or older could save and invest money tax-free during their lifetime – either for retirement or for any other purpose. TFSA contributions are made with after tax dollars, but income earned by the amounts contributed as well as any gains inside it are tax-free, even when withdrawn.
The contribution limit is set each year and increases based on inflation. The maximum amount for 2023 has been set at $6,500, reflecting the limit’s index to inflation—rounded to the nearest $500. Unused TFSA contribution room can be carried forward and any amounts withdrawn in the current year can only be put back in the following year.
- The 2023 contribution of $6,500 is $500 higher than 2022
- The total contribution room available in 2023 for someone who has never contributed and has been eligible for the TFSA since its introduction is $88,000.
- The annual limit is indexed to inflation and rounded to the nearest $500. The Canada Revenue Agency’s indexation increase for 2023 is 6.3%.
- Anyone 18 or older is eligible to open a TFSA and contribution room accumulates beginning in the year they turn 18.
TFSA contribution limits dollar amounts by year:
For 2009 -2012: $5,000
For 2013 and 2014: $5,500
For 2015: $10,000
For 2016, 2017, and 2018: $5,500
For 2019, 2020, 2021, 2022: $6,000
For 2023: $6,500
Federal tax bracket thresholds for 2023
The 33.0% tax rate begins at taxable income of over $235,675, up from $221,708 in 2022
The 29.0% tax rate begins at taxable income of over $165,430, up from $155,625 in 2022
The 26.0% tax rate begins at taxable income of over $106,717, up from $100,392 in 2022
The 20.5% tax rate begins at taxable income of over $53,359 up from $50,197 in 2022
Income below $53,359 is taxed at 15%
The basic personal amount (BPA) for 2023 is $15,000, for taxpayers with net income of $165,430 or less. Income levels above $165,430, the BPA is clawed back until it reaches $13,521 for net income of $235,675 (taxable income above which the 33% bracket begins).
