As promised, the Liberals have rolled back the Tax Free Savings Account (TFSA) annual contribution room to $5,500 (from $10,000) beginning January 1st 2016. The new contribution room will be indexed in future years. The good news is that the lower 2016 contribution room does not impact any previous TFSA contribution room available to you. For example, if you haven’t taken advantage of the $10,000 contribution room that was granted in 2015, or maximized your TFSA contributions in previous years, you can still contribute up to your TFSA contribution room limit at any time. Any unused contribution room is carried forward to future years. The table below shows the TFSA contribution room granted each year. Starting in 2009, TFSA contribution room accumulates every year, if you are 18 years of age or older, have a social insurance number and are a resident of Canada.
| Year | TFSA contribution room | Year | TFSA contribution room |
| 2009 | $5,000 | 2013 | $ 5,500 |
| 2010 | $5,000 | 2014 | $ 5,500 |
| 2011 | $5,000 | 2015 | $10,000 |
| 2012 | $5,000 | 2016 | $ 5,500 |
When the TFSA was first introduced in 2009 and the annual contribution room was $5,000 that might not have been much of an incentive to start a TFSA. However, 7 years later, the total accumulated contribution room per individual is $41,000 (increasing to $46,500 as of January 1, 2016).
Your accumulated TFSA contribution room is reduced by all contributions you have made to date. Any TFSA withdrawals also impact your available TFSA contribution room. To check how much you can contribute to your TFSA for 2015, you can contact Canada Revenue Agency at 1-800-267-6999.
The key benefits of a TFSA are flexibility (around your investment options, how and when you use these savings and the timing of your contributions and withdrawals). More importantly, you never pay tax on any income or growth you earn on your investments, it’s “tax free”. Whether you have short-term or longer-term goals, the TFSA can be a great place to save your money. If you have other questions about your TFSA, please contact us.
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