Common Mistakes to Avoid in Your Tax-Free Savings Account

✅Understanding the correct terminology and rules of the TFSA, including the legal age to open an account and the number of accounts one can have.

💰Knowing the importance of using the TFSA as an investment vehicle rather than just a savings account.

🗂️Being aware of eligible investments and avoiding non-eligible investments within the TFSA.

📈Recognizing that gains within the TFSA do not affect contribution room, allowing for growth and compounding over time.

🚫Understanding the prohibition of day trading within the TFSA and the potential consequences of over-contributing.

Can I open multiple Tax-Free Savings Accounts?

—Yes, you can open multiple TFSA accounts with different providers. However, your contribution room does not multiply, and the total contribution limit applies to all your accounts combined.

Can I withdraw money from my TFSA and recontribute it in the same calendar year?

—No, if you withdraw money from your TFSA in a calendar year, you can only recontribute that amount in the following calendar year to avoid over-contributing.

Are gains within the TFSA taxed?

—No, gains within the TFSA are not subject to tax. You can grow your investments tax-free within the account.

Do I have to report TFSA contributions on my tax return?

—No, you do not have to report TFSA contributions on your tax return. Contributions are made with after-tax income and do not affect your taxable income.

How can I keep track of my TFSA contribution room?

—You can track your TFSA contribution room manually using an excel spreadsheet or by keeping a written record of your contributions and withdrawals. Online tools like CRA My Account can also provide information on your contribution room.

00:00Introduction to the video and invitation to a live event.

00:18Explanation of the game to test the viewer's knowledge about the TFSA and common mistakes.

00:39Mistake #1: Using the wrong terminology for the TFSA.

01:31Mistake #2: Assuming you have to be 18 to open a TFSA.

01:59Mistake #3: Thinking you can only have one TFSA account.

02:03Mistake #4: Believing you can only open a TFSA at a bank.

02:38Mistake #5: Using the TFSA only as a savings account and not for investing.

03:13Level 2 mistakes: Not tracking contribution limits, not being aware of accruing space, and gains not affecting contribution room.

03:55Level 3 mistakes: Day trading in the TFSA, investing in non-eligible investments, and not considering the 15% withholding tax on foreign dividends.

06:31Mistake #9: Making withdrawals and contributions in the same calendar year.

09:32Mistake #14: Assuming you must be super aggressive with your TFSA investments.