Tax Free Savings Account limit 2022
Canada Revenue Agency announced it’s new Tax Free Savings Account (TFSA) contribution limit for the year 2022.
The maximum amount has been set at $6,000, matching the amount set from 2019 to 2021. Unused TFSA contribution room can be carried forward and any amounts withdrawn in the current year can only be put back in the following year.
The maximum lifetime contribution limit is now $81,500.
So what does this all mean?
It means if you are were 18 or older in 2009 when TFSA’s started, you can contribute up to $81,500 into your TFSA Investments, not including an interest or gains your existing investments may have made.
For Example, if you have invested $50,000 into a segregated fund investment over the last 10 years and it has gained $15,000 in that time, for a total of $65,000 than you still have $31,500 in eligible contribution room.
It also means that if you were at your maximum contribution space as in 2021, you have an additional $6000 of contribution room.
Avoid This Mistake
It’s important to remember what makes a TFSA such a great investment vehicle. You see, the government considers the money you invest in your TFSA to already be taxed and what they promise is that they will never tax any gains on that money going forward. So…. if you’ve earned $15,000 on a $50,000 in your TFSA, you are saving about $4000 to $6000 in taxes.
The big mistake I see people make is that they invest of their TFSA into a regular savings account. Now the last time I checked, the big banks were currently paying about 0.15% on a high interest savings account. That means on the same $50,000 investment, you’re earning about $75 a year. And the the tax you are savings is about $20.
You want to invest your TFSA somewhere you can get some kind of a return because that’s the real benefit.
I mean, what you want do? Make $15,000 and save $4000 or make $75 and save $20? I know what I’m choosing.
Let me be clear, though. I’m not saying don’t keep money in a savings account. I think it’s very important to have a stash of emergency funds set aside. What I’m saying is don’t use your TFSA room for the at purpose. Pay the tiny amount of tax and use that TFSA space for something far more profitable like Segregated Funds.
So what are you waiting for, contact your advisor and start filling up the TFSA account with good solid, interest earning investments.
Don’t have an advisor? No problem. Just give me a call or shoot me an email. I will get you all set up.