TFSA: Frequently Asked Questions

Posted: March 1, 2013

With the TFSA entering its fifth year, it is becoming a very popular investment vehicle for many Canadians. Here are some of the most frequently asked questions that we have faced regarding TFSA.

Can I set up more than one TFSA Account? (LCGE)

You can open up however many TFSA accounts as you desire. However, the total of all the contributions you make to the different TFSA accounts must be within the total contribution limit as highlighted in our previous post titled “TFSA Benefits and Pitfalls”

What happens if I didn’t keep track and I over contributed to my TFSA?

There will be a monthly penalty of 1% per month on your excess contributions. This is why we recommend you check your unused contribution room before contributing

Are the service fees that I pay for my TFSA tax deductible?

Service fees for TFSA are not tax deductible. But do keep in mind that service fees (i.e. management and advisory fees) incurred to generate property income outside of a TFSA may be tax deductible. click here to learn more

What if I become a Non-Resident? Does that mean my growth is the TFSA becomes Taxable?

You will still maintain your TFSA and the withdrawals you make in the future will remain tax free. One you end Canadian residency, you will no longer be able to contribute money into your TFSA (if you do, there will be a 1% per month penalty). In addition the annual contribution room (i.e. $5,500 in 2013) will not accrue for years which you are not a Canadian resident. Keep in mind that, as a non-resident you may be taxed on your TFSA income in the country of your residence.

What if I am a part-time resident of Canada, does that mean my contribution room is pro-rated?

No. if you are a part-time resident of Canada, meaning you established residency or ended residency in Canada part-way through the year, you will still be eligible for the full contribution room. For instance, if I immigrated to Canada on June 4, 2013, I will still be eligible to contribute $5,500 for 2013.

Share this article!