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 2023 is $6,50011 Unlike the RRSP, TFSA contributions are not deductible for tax purposes. However, capital and income withdrawals are not taxable.
12 Amount indexed annually since 2010 and rounded to nearest $500 (corresponding to $6,163in 2022, before rounding). The annual contribution ceiling has been $6,000 since 2019, and was $5,500 for the years 2013, 2014 and from 2016 to 2018, $10,000 in 2015, and $5,000 for 2009 to 2012 (cumulative total of $81,500 in 2022).
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, FHSA and TFSA12.
RRSP | RESP | TFSA | FHSA | |
Contributions | ||||
Annual maximum |
Lesser of:
|
No limit (but grant limited to the first $2,500 of contributions paid each year) | $6,500 in 2023 (cumulative total of $88,000 in 2023) | $8,000/year (not indexed) |
Cumulative limit | None | $50,000 | None | $40,000 |
Grant | No | Yes | No | No |
Deductibility | Deductible | Not deductible | Not deductible | Deductible |
Unused contributions room | Can be carried forward | Can be carried forward (grants limited when carried forward) | Can be carried forward | Unused ceiling can be carried forward up to a maximum of $8,000 |
Excess contributions |
|
Penalty of 1% per month | Penalty of 1% per month | Penalty of 1% per month |
Withdrawals | ||||
Taxation | Taxable (except for HBP and LLP repaid on time) | Partially taxable | Non-taxable | Non taxable if eligible withdrawal |
Specific conditions | None (except for HBP and LLP) | Beneficiary must pursue post-secondary education | None | Withdrawals must be used to purchase a first eligible home |
Ceiling |
|
|
|
|
Duration and Age Restriction | ||||
Minimum age of beneficiary | No minimum age (18 years to be entitled to the $2,000 excess contribution) | No minimum age | 18 years | 18 years |
End of plan | The year in which the policyholder reaches the age of 71 | 35 years after opening (40 years for a disabled person)13 | No maximum age or deadline for withdrawals | At the end of the first of the following years: |
|
12 Parents who want to save for the financial security of a handicapped child can also invest in an RDSP (see Section IV). 13 No contributions after the 31st anniversary of opening the RESP (35th anniversary for a disabled person). Beneficiaries are entitled to a grant for contributions made on their behalf until the end of the calendar year in which they reach the age of 17 (before the age of 21 for bounds).
This document is up to date as of August 31, 2023 and reflects the status of legislation, including proposed amendments at this date.