i noticed that i have what i consider a lot of money in my TFSA contribution room, but i have no idea what a tax free savings account even is, or what is meant by contribution room, or how i’ve accumulated that money. am i supposed to do anything with it? is there anything i should know? for context i’m a student in my mid-ish 20s
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This is an investment account that you are allowed to purchase registered securities from, and any gains on those assets will never be charged capital gains taxes. Essentially, any earnings on those investments (from the TFSA) are tax-free.
Each year (from the age of 18 I think) you are given a max amount that you can deposit into your TFSA. This actually changes from year to year. Last year it was 6000, now its 6500 (in Canada). These amounts stack though, so if you never contributed to the TFSA, you would be able to make a large chunk contribution at once.
If you go over your limit, then any profits earned on the amount beyond that limit would be taxed.
TL:DR – government lets you invest a relatively small amount in your lifetime for tax-free profits. Use it if you want to buy stocks. It doesn’t work for crypto or any unregistered security though.
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