The TFSA account is relatively new and often referred to as a younger sibling to the RRSP. The choice of investing in your TFSA or RRSP first is still a debated question but what isn’t up for debate is your contribution amount per year and how much you accumulate in contribution room.
The TFSA contribution limits starts accumulating once you turn 18 unlike RRSP where you need to have income declared to accumulate contribution room. It’s the perfect vehicle to create a passive income machine with dividend investing.
How much you can contribute is based on your accumulated limit and how much you have contributed. Your TFSA contribution room is pretty easy to calculate.
Annual TFSA Contribution Limits
Here are the limits for each year since inception. The total since the beginning and up to 2019 is $63,500. All of the profits made within a TFSA is completely tax free. The latest increase for 2019 was recently announced and can be found on the government website for personal tax limits indexed to inflation.
Year | Limit | Total |
---|---|---|
2019 | $6,000 | $63,500 |
2018 | $5,500 | $57,500 |
2017 | $5,500 | $52,000 |
2016 | $5,500 | $46,500 |
2015 | $10,000 | $41,000 |
2014 | $5,500 | $31,000 |
2013 | $5,500 | $25,500 |
2012 | $5,000 | $20,000 |
2011 | $5,000 | $15,000 |
2010 | $5,000 | $10,000 |
2009 | $5,000 | $5,000 |
If you turned 18 after 2009, take the total for the year before your turned 18 and deduct it from the total and that will be your total contribution room. My suggestion is that you try to keep up with filling the contribution room if you can for long term retirement planning.
Accessing Your Contribution Details
As soon as you file a tax return, you should have an account with the Canada Revenue Agency and you can always check the status of your contribution room under your account. Financial institutions are required to report the contributions.
You simply need to create an account. It’s pretty useful to have the account and you can manage your direct deposit for your tax return.
TFSA Over-Contribution Penalty
If you happen to over contribute, the extra contribution will be subject to a 1% penalty per month. I recently handled an RRSP over-contribution and it’s more paperwork than you want.
If you realize you have over-contributed, quickly withdraw the amount and start filling the forms. Get ahead of it to avoid surprises.
TFSA Growth Opportunity
Having the account is step one in building wealth, the next step is putting your money at work. When you do and you start early, time can do wonders when partnered with compound growth. Below is a graph and table showing the potential growth.
Before you think the 10% growth in the table below is not possible, my TFSA market value this November 2018 is at $96,937. Not too far from the $98K in the table I would say. Check out my stock portfolio to see what I hold. Dividend investing is true passive income.
It’s true what they say: “The first million is the hardest!”.
Year | Limit | Contributions | 5% Growth | 10% Growth |
---|---|---|---|---|
2009 | $5,000 | $5,000 | $5,250 | $5,500 |
2010 | $5,000 | $10,000 | $10,762 | $11,550 |
2011 | $5,000 | $15,000 | $16,550 | $18,205 |
2012 | $5,000 | $20,000 | $22,628 | $25,525 |
2013 | $5,500 | $25,500 | $29,534 | $34,128 |
2014 | $5,500 | $31,000 | $36,786 | $43,590 |
2015 | $10,000 | $41,000 | $49,125 | $58,949 |
2016 | $5,500 | $46,500 | $57,356 | $70,984 |
2017 | $5,500 | $52,000 | $65,999 | $84,034 |
2018 | $5,500 | $57,500 | $75,074 | $98,487 |
2019 | $6,000 | $63,500 | $85,128 | $114,936 |
2020 | $6,000 | $69,500 | $95,684 | $133,030 |
2021 | $6,000 | $75,500 | $106,769 | $152,933 |
2022 | $6,000 | $81,500 | $118,407 | $173,826 |
2023 | $6,000 | $87,500 | $130,627 | $198,909 |
2024 | $6,000 | $93,500 | $143,459 | $225,400 |
2025 | $6,000 | $99,500 | $156,932 | $254,540 |
2026 | $6,000 | $105,500 | $171,078 | $286,594 |
2027 | $6,000 | $111,500 | $185,932 | $321,853 |
2028 | $6,000 | $117,500 | $201,529 | $360,639 |
2029 | $6,000 | $123,500 | $217,906 | $403,303 |
2030 | $6,000 | $129,500 | $235,101 | $450,233 |
2031 | $6,000 | $135,500 | $253,156 | $501,856 |
2032 | $6,000 | $141,500 | $272,114 | $558,642 |
2033 | $6,000 | $147,500 | $292,019 | $621,106 |
2034 | $6,000 | $153,500 | $312,290 | $689,817 |
2035 | $6,000 | $159,500 | $334,866 | $765,399 |
2036 | $6,000 | $165,500 | $357,910 | $848,538 |
2037 | $6,000 | $171,500 | $382,105 | $939,992 |
2038 | $6,000 | $177,500 | $407,511 | $1,040,592 |
2039 | $6,000 | $183,500 | $434,186 | $1,151,251 |
2040 | $6,000 | $189,500 | $462,195 | $1,272,976 |
2041 | $6,000 | $195,500 | $491,605 | $1,406,874 |
2042 | $6,000 | $201,500 | $522,486 | $1,554,161 |
2043 | $6,000 | $207,500 | $554,910 | $1,716,177 |
2044 | $6,000 | $213,500 | $588,955 | $1,894,395 |
2045 | $6,000 | $219,500 | $624,703 | $2,090,435 |
2046 | $6,000 | $225,500 | $662,238 | $2,306,078 |
2047 | $6,000 | $231,500 | $701,650 | $2,543,286 |
2048 | $6,000 | $237,500 | $743,033 | $2,804,215 |
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