Tax-free savings account contribution rules

The basic rules relating to tax-free savings account include the following:

Contributions can be made by Canadian residents aged 18 or over

• Up to $5,000 per year can be contributed, with unused contribution room being carried forward.
• The $5,000 annual contribution limit will be indexed to inflation in $500 increments (i.e., to the nearest $500), in the same manner as personal tax credits and tax brackets are indexed.  The 2012 limit is still $5,000.  The 2013 TFSA limit is $5,500.  The Department of Finance announced this in a news release on November 26, 2012.
• There is no lifetime limit to the amount of contributions.
• If a person has contribution room, but no funds to contribute, they may contribute funds given to them by their spouse or common-law partner, with no attribution of income to the spouse.
• Contributions can consist of in kind contributions of qualified investments.  At the time the investments are contributed, there is a deemed disposition.  Any resulting
  • capital gain will be taxable
  • capital loss cannot be claimed

The easiest way to establish a record of your TFSA contribution room is to file a tax return annually, even if you have no taxable income.  Your TFSA contribution room will then be reported on your notice of assessment.

For more information visit the Tax Tips Website