The federal government in Ottawa is raising the contribution limit to tax-free savings accounts (TFSAs) by $6,000 for 2022.
The contribution limit increase means that, beginning January 1, people who have already contributed the maximum allowable amount to their TFSA can add an additional $6,000 to invest in anything they want, without any tax implications.
With the $6,000 limit increase, the maximum contribution for people aged 18 or older from when the TFSA was first introduced in 2009 will be $81,500.
Annual TFSA limits are at the discretion of the federal government through the Canada Revenue Agency (CRA). Over 15 million Canadians have at least one TFSA to save for retirement, education, vacations, or to invest and trade.
The total amount of money now held in TFSAs in Canada is more than $350 billion. Funds can be withdrawn from a TFSA at any time and investment returns, whether capital gains on equities or income from dividends and fixed income, are never taxed.
In comparison, half of capital gains on equities in non-registered accounts are taxed and income is fully taxed. Dividends are also subject to full taxation except for a tax credit on eligible payouts.
A TFSA can hold just about any type of investments, including stocks, bonds, mutual funds, exchange-traded funds (ETFs), real estate investment trusts and even options.
