Your TFSA in 2021. What Can You Contribute?

When it comes to flexible investment tools, there's nothing quite like a Tax-Free Savings Account (TFSA). This registered account allows you to hold not just savings but also investment equities like stocks, bonds, mutual funds and GICs. All of your investments grow tax-free in a TFSA. What's even better? You're not taxed when you make withdrawals, and you can reinvest that amount in future years.

If you're thinking about contributing to a TFSA in 2021, that's excellent news. However, you may be a bit confused about how much you are allowed to contribute. You're not alone in your confusion. TFSA contribution room is indexed for inflation, so limits vary by year (see Table 1). For 2021, that limit is $6000, but if you've never contributed to a TFSA before or haven't invested the maximum amount in previous years, you can carry forward unused amounts.

If You're Investing In A TFSA For The First Time

Using Table 2, find the year you turned 18. The corresponding limit is what you are allowed to contribute to a TFSA in 2021 - unless you live in BC, NL,NS or NB. In these provinces you can accumulate TFSA room as of age 18 but are not eligible to open a TFSA account until age 19.

If You Have A TFSA From Previous Years

Use the information in Table 2, along with the formula below, to determine what you are allowed to contribute this year:

1. Choose the year you turned 18 and the corresponding TFSA limit for 2021.
2. Add any previous withdrawals made since 2009 or the year you turned age 18.
3. Subtract all of your previous contributions from earlier years.
4. The resulting number is this year's contribution room.