As of now, the TFSA (Tax-Free Savings Account) contribution limit for 2024 has increased by $500 to $7,000 per year.
Explore the Updated TFSA Contribution Limit for 2024 on Ratestead.ca
Attention savers! The Tax-Free Savings Account (TFSA) contribution limit has bumped to $7,000 this year from $6,500 in 2023. The Canada Revenue Agency (CRA) sets the TFSA contribution limit annually, factoring in inflation and rounding it to the nearest $500. But what else should you keep in mind? Let’s delve deeper.
How to Calculate Your TFSA Contribution Room
To gauge your TFSA’s total contribution room, add this year’s limit to any unused room from previous years, along with any withdrawal amounts from prior years. Remember, your contribution room starts accruing from your 18th birthday or 2009 (the TFSA’s inception), whichever is later. For instance, if you’re opening a TFSA for the first time in 2024 without any prior contributions elsewhere, your available contribution room would total $95,000. You can easily track your TFSA contribution room through My Account on the CRA website, though it may not reflect current-year contributions or withdrawals. It’s crucial to verify your contribution room annually to avoid penalties from the CRA for over-contributing.
Understanding the Significance of the TFSA Limit
Exceeding your contribution room can lead to taxation at a rate of 1% per month on the excess amount. It’s vital to discern what qualifies as a contribution. Transferring funds between TFSAs in different institutions, when executed correctly, won’t impact your contribution room. However, withdrawing funds and subsequently contributing them to another TFSA constitutes a new contribution and could result in penalties for over-contributing.
TFSA Contribution Deadline
Unlike a Registered Retirement Savings Plan (RRSP), you can contribute to your TFSA at any time of the year since any unused room carries forward. Therefore, there’s no need for your deposits to align with tax time. However, to manage contributions and withdrawals and keep track of your TFSA limit, mark Dec. 31 and Jan. 1 on your calendar. Your contribution room is determined by the calendar year ending Dec. 31, and your new TFSA limit for the year kicks in on Jan. 1.
Stay informed and make the most of your TFSA contributions!
