A Tax-Free Savings Account (TFSA) is a beneficial investment option in Canada, allowing residents to grow their wealth tax-free.
Contributions are made with after-tax dollars, and any investment income or withdrawals are not taxed. In 2024, the annual contribution limit is $7,000, with the maximum cumulative contribution room since 2009 being $95,000.
TFSAs can hold various investments, including ETFs, mutual funds, and stocks, making them ideal for long-term growth. Residents of Canada aged 18 or older with a valid Social Insurance Number (SIN) can open a TFSA, regardless of their legal status.
It's essential to track contributions to avoid penalties, as excess contributions are taxed at 1% per month.
If a TFSA holder becomes a non-resident, they can keep their TFSA without accruing new contribution room, but should avoid contributing to avoid penalties.
Upon the holder's death, a spouse or common-law partner can inherit the TFSA tax-free as a successor holder.
Source: https://www.cicnews.com/2024/08/how-residents-of-canada-can-invest-tax-free-0845801.html#gs.dtfe7s
