The Canada Revenue Agency (CRA) will increase the total amount that Canadians can contribute to a tax-free saving account (TFSA) by $7,000 as of Jan. 1, 2025.
The limit increase is indexed to inflation annually, and it matches this year’s amount, which was $500 more than in 2023 and $1,000 more than the $6,000 annual limit from 2019 to 2022.
This means that for those who have already contributed the maximum allowable amount into their TFSA up until the end of this year, they’ll be able to contribute an additional $7,000 in 2025.
For those who have contributed less than the maximum, any unused contribution room is carried forward starting from the day they became eligible, either in 2009 when the TFSA program began, or when they turned 18 if that was in the years since.
With the $7,000 increase in 2025, the total contribution room available for someone who has never contributed to a TFSA and was at least 18 years of age when it was first introduced will be $102,000, up from $95,000 this year.
A TFSA works as a tax-sheltered investing and savings account, where funds and investment returns can be withdrawn at any time and are never taxed.
“In comparison, half of capital gains on equities in non-registered accounts are taxed and income is fully taxed. Dividends are also subject to full taxation with the exception of a tax credit on eligible payouts,” the CRA said in a release.
“TFSAs have become wildly popular with Canadians for short-term savings such as education, vacations and even day trading. But with the total room for someone who has never contributed now at $102,000 it is also an effective retirement savings tool to compliment a registered retirement savings plan (RRSP).”