Time to go over what a TFSA is, how you can use one to maximize your savings, AND what the 2021 updates are!
In our previous post on emergency funds, we talked a little bit about the TFSA. You can check that video out as well.
A TFSA, or Tax Free Savings Account, is an account that allows you to withdraw money (including gains), tax free! The money that goes into the account is still taxed. However, once in a TFSA, the money will gain a little bit of interest. You also can make an investment decision with this money. For example, you might choose to invest in a mutual fund or individual stocks. If you earn money on these investments, the gains are tax free! Keep in mind, however, that any losses will also not be able to be used against your taxes to offset capital gains from other investments.
In 2021, the TFSA deposit limit is $6,000. This means that any Canadian citizen over the age of 18 is able to deposit $6,000 to their Tax Free Savings account this year.
Stay tuned because with RRSP season coming up, we will be talking a lot about how you can do some tax planning and use these accounts to your advantage!
Give this video a watch if you’re interested in learning more, and be sure to subscribe to our channel for weekly videos!