Tax-Free Savings Account (TFSA) Contribution Limits for 2018
A TFSA is a flexible, general purpose savings vehicle that allows you to make contributions each year and to withdraw funds at any time in the future. A TFSA provides you with a powerful incentive to save by allowing the investment growth to accumulate and be withdrawn tax free.
The TFSA contribution limit for 2018 has increased by $5,500.
The total room available in 2018 for someone who has never contributed and has been eligible for the TFSA since its introduction in 2009 is $57,500.
To confirm your Contribution Room for 2018, please view your latest Notice of Assessment or login online to your CRA account : My Account for Individuals.
What is the difference between a TFSA and a RRSP?
TFSAs and RRSPs both offer tax advantages to help you reach your savings goals. If you can afford it, a good strategy is to contribute as much as you can to both. But if you must choose one over the other, make sure you understand how they differ. And then make your choice based on your own individual financial and tax situation.
A quick comparison
| RRSP | TFSA | |
| Need earned income to contribute | ✓ | ✗ |
| Tax-deductible contributions | ✓ | ✗ |
| Tax-free withdrawals | ✗ | ✓ |
| Age limit for making contributions | ✓ | ✗ |
Top Differences between TFSAs and RRSPs
- An RRSP is intended for retirement savings. A TFSA can be for any type of savings goal.
- RRSP contributions are tax deductible. TFSA contributions are not. With an RRSP, you deduct your contribution from the income you report on your tax return. With a TFSA, you can’t deduct your contribution.
- You pay tax on your RRSP withdrawals because you made the contributions with pre-tax dollars. TFSA, withdrawals are tax free because you made the contributions with after-tax dollars.
- In the year you turn 71, you can’t make any more contributions to your RRSP and you must close it. At that time, you must use your savings to buy either an RRIF or an annuity. With a TFSA, you don’t have to stop contributing or close it at a certain age.
- You need earned income to contribute to an RRSP but not to a TFSA.
The main difference between an RRSP and TFSA is the timing of taxes:
- An RRSP lets you defer taxes – an advantage if your marginal tax is lower in retirement.
- With a TFSA, you’ve already paid tax on the money you contribute – an advantage if your marginal tax is higher when you withdraw the money.