What To Do With Your Tax Refund (1 of 2)
It’s tax season – don’t forget to file by April 30th! If you’re considering investing your refund in TFSAs, this two-part article is for you! Read part one below, and come back next week to read part two! Before you read on, I want to make sure you know that I’m not a financial advisor, but I love talking about money and sharing things that have worked well for me! That said, it’s a good idea to always do your own research, too.
Part One: What is a TFSA?
TFSA stands for Tax-Free Savings Account, a program the Canadian Government created in 2009. Contributions are not deductible for income tax purposes, but income earned (such as interest, capital gains, or investment income) is tax-free, even when withdrawn. Every year, Canadians over 18 can contribute up to a limit – it began as a $5,000 limit, and has increased over the years: the limit for 2019 is $6,000. The contribution room accumulates each year, and you regain the contribution room from any withdrawals! But it’s important to note that if you make a withdrawal, you don’t get that room back until the following calendar year.
So how much room do you have if you’ve never contributed? If you were 18 or older in 2009 when TFSAs came on the scene, you now have $63,500 of contribution room. If you’ve contributed but also made withdrawals, and aren’t sure where you stand, you can view your contribution room here: https://www.canada.ca/en/revenue–agency/services/e–services/e–services–individuals/account–individuals.html
Tune in next week for how to use this financial tool! Can’t wait? Start your research here: