TFSA Rules
TFSAs are pretty straightforward but there are some basic rules. Here’s the main ones you should know about:
- You need a valid SIN and be over 18 in order to have a TFSA.
- You can only contribute to your own TFSA. If you have a spouse with their own TFSA, you are allowed to give them money for them to contribute, but you can’t do it yourself.
- Designate your spouse or common-law partner as your TFSA’s successor holder in the event of your death. If you are single, choose a family member or trusted friend as your beneficiary instead.
- If you are new to TFSAs, stick with only 1 account. Once you get the hang of how they work and the rules, go ahead and open more accounts if you wish.
- If you are a long-term low-income earner, open a TFSA. If you are a long-term high-income earner, consider an RRSP.
- If you withdraw money from your TFSA, wait until the next calendar year before depositing that same amount back in. If you do it too soon, you run the risk of over-contributing and getting dinged by the CRA.
- If you want to move your money from one TFSA to another, but don’t want this to eat into your contribution room, you need to get your bank or brokerage firm to do it themselves as a direct transfer. If you do it yourself you may get dinged for an inadvertent over-contribution.
- You are allowed to shuffle money around within your TFSA (for example, moving money from mutual funds to stocks) without incurring any CRA penalties. Just make sure the money you are shuffling doesn’t have a maturity date attached to it, or you may end up paying a bank penalty.
- Don’t intentionally over-contribute if you think the extra money you’ll be profiting will more than cover the 1% penalty. The CRA will consider this an “advantage” and ding you with extra taxes and penalties.
2 Comments. Leave new
Is investing funds from a personal line of credit in a TFSA permitted?
Hi Dan,
Typically, there are no restrictions on using a personal line of credit to invest funds in your TFSA (though best to double-check with your bank). Also, ensure that what you’re earning from your TFSA investments is more than what you’re paying in interest on the loan.