Summary: TFSA Contribution Limit
Wondering what the 2021 TFSA contribution limit will be? Well, the wait is finally over as it has officially been announced. The 2021 limit is $6,000, matching the amount set in 2019 and 2020.
The amount of money that you can contribute to your TFSA is limited each year and there is a specific contribution limit from 2009 when TFSAs were first introduced by the Canadian government.
With this TFSA contribution limit announcement, the total contribution room available in 2021 for someone who has never contributed and has been eligible for the TFSA since its introduction in 2009 is $75,500.
Here is the contribution limit for each year since TFSAs were introduced:
Your contribution room accumulates beginning in the year in which you turned 18. So, for example, if you turned 18 in 2015, you would have a TFSA contribution limit of $44,500 (this includes the 2021 limit).
If you accidentally over contribute to your TFSA, 1% of the excess contribution will be taxed every month until the over contribution is withdrawn. Although 1% might not seem like a lot, it adds up quickly when it’s eating at the savings or investments that you’re trying to grow. A good way to avoid this is by keeping track of your TFSA contribution room by checking your CRA My Account.
Benefits of a TFSA
The biggest benefit is that earnings in your TFSA are tax-free. When you contribute to a TFSA, you don’t receive an up front tax break like you do with an RRSP, but you will receive big breaks in the future, as your investments (stocks, bonds, cash, etc.) and the gains you earn on these investments will not be subject to any taxes.
To learn more about TFSAs, check out our recent article on Understanding TFSAs. If you already have a TFSA and want to maximize your investments, check out our recent article on TFSA Investment Options and Strategies.