It’s what we were expecting but now it’s been officially announced: the new 2021 annual contribution limit for the TFSA is $6,000.
The $6,000 annual limit is the same as the 2020 annual contribution limit, representing no change for the new year. However, it brings the total maximum lifetime contribution of the TFSA to $75,500 for those born in 1991 or earlier.
What is the TFSA?
The Tax-Free Savings Account (TFSA) allows Canadians to shelter investment income from taxes. When you save or invest in a TFSA, all the interest, dividends, and capital gains your money earns is completely tax-free.
This makes the TFSA an ideal account to save for retirement, even though most people don’t think of it that way. Many people use their TFSAs to save for vacations or house down-payments. You don’t need interest earned on vacation savings to be tax-free, but you do need investment gains on retirement savings to be tax-free!
Because the TFSA has so much tax-saving potential, there are rules around how much you can contribute. You can open a TFSA as soon as you turn 18, and are entitled to the annual contribution room for that year and every year thereafter. You can read more in our post The TFSA Explained!
Where should I open a TFSA?
Most financial institutions offer Tax-Free Savings Accounts, but you should be looking to 1) invest your TFSA in the stock market and 2) pay the lowest fees possible.
Wealthsimple TFSA
Wealthsimple offers a totally hands-off investing experience. All you need to do is open an account, and they’ll take care of the rest!
Welathsimple is a robo-advisor, and the best solution for people who don’t know how or don’t want the hassle of managing their own investment portfolio.
Questrade TFSA
If you want to manage your own portfolio, Questrade is the best discount brokerage on the market. They offer low-commissions trading and it’s free to buy ETFs.
Check out our full Questrade Review for more info.
How much can I contribute to a TFSA?
Every eligible Canadian gets the same annual contribution limit to the TFSA. But your lifetime TFSA contribution limit is determined by the year you were born. You are entitled to the TFSA contribution room for the year you turned 18, and every year thereafter.
Still confused? Check out How to Calculate Your TFSA Contribution Limit.
If you aren’t able to max out your TFSA one year, your unused contribution room gets carried forward to future years. Likewise, if you withdraw from your TFSA, that amount gets added back as contribution room the following year! Unlike the RRSP, you never lose your TFSA contribution room. You can read more about the differences between the RRSP and the TFSA here.
3 Comments. Leave new
Hi,
The infographic for the lifetime TFSA contribution limits based on birth year has an error.
I was born in 1995 and will have 55,500$ for my contribution limit; not 54,500$
There is another error with the infographic.
I was born in 1994 and will have $61,000 for my contribution limit; not $60,500.
I suggest you remove the inforgraphic or update it so people arent receiving misinformation
If you were born in 1994 you were eligible to begin contributing to the TFSA in 2012.
The annual contribution limit in 2012 was only $5,000 not $5,500.
You definitely don’t have $61,000 of contribution room. You have $60,500.