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TFSA LIMIT LIKELY TO INCREASE

The 2019 contribution limit for Tax Free Savings Accounts (TFSA) is expected to grow to $6,000. The contribution limit is calculated using an indexing mechanism, in which the base amount compounds annually by the Consumer Price Index, and is then adjusted to the nearest $500.

In 2009, when the TFSA was first introduced, the base amount was established at $5,000. The accumulation of annual increases will bring this amount above $5,750 in 2019. When this number is rounded to the nearest $500, it becomes $6,000.

This increase will bring the total contribution room since inception to $63,500. If a taxpayer has missed contributing in any year, the room for that year remains available for contribution in a later year.

It is important to remember that if a taxpayer transfers investments into a TFSA, they may have to pay tax on the amount that is transferred into the TFSA.

For instance, if an investment has gone up in value by $4,000 when it is transferred into the TFSA, the taxpayer will have to pay tax on that gain. It only holds its tax free status once it goes into the account.