Section 7 – Investments
Tax-Free Savings Account
Individuals who are 18 years of age or older may contribute annually to a TFSA and income earned on such amounts is sheltered from income tax. The maximum amount that can be invested in 2020 is $6,000.10 Unlike the RRSP, TFSA contributions are not deductible for tax purposes. However, capital and income withdrawals are not taxable.
10 Amount indexed annually since 2010 and rounded to nearest $500 (corresponding to $5,959 in 2020, before rounding). Contribution ceiling was $6,000 in 2019, $5,500 for the years 2016 to 2018, $10,000 in 2015, $5,500 in 2013 and 2014 and $5,000 for 2009 to 2012.
Consider making a donation to your child or adult grand-child to invest in a TFSA so that the amounts invested can earn income tax-free
The following table compares the main features of the most common registered plans, i.e. RRSP, RESP and TFSA11
|Deductibility||Deductible||Not deductible||Not deductible|
|Unused contributions room||Can be carried forward|
||Penalty of 1% per month||Penalty of 1% per month|
|Specific conditions||None||Beneficiary must pursue post-secondary education||None|
|Particularities based on savings objectives|
|Home purchase||Not intended for these purposes|
11 Parents who want to save for the financial security of a handicapped child can also invest in an RDSP (see Section IV). 12 Limit of $5,000 for first full-time session. 13 Under terms of Lifelong Learning Plan ($20,000, see Section III) and HBP ($35,000, see Section II).
This document is up to date as of September 3, 2020 and reflects the status of legislation, including proposed amendments at this date.