This is a follow up post to my original posting about tax free savings accounts to explain how the tax free savings account limit for 2013 works.
Tax Free Savings Account Limit 2013
Although the annual tax free savings account limit for 2013 is $5,500 if you have never contributed to a tax free savings account before then you can contribute up to $25,500 in 2013, provided you were 18 years of age or over in 2009, as you are allowed to contribute any unused Tax free savings account (TFSA) contribution room from previous years.
Tax free savings account allow you flexibility to withdraw any amount from the tax free savings account at any time without any tax consequences. Any withdrawal which you make from your plan, provided that you did not over contribute, will allow you to contribute the amount of your withdrawal(s) in the following year(s).
Penalties for Over contributions to Tax Free Savings Account
If you over contribute to your tax free savings account the over-contributed amount is subject to a tax of 1% per month for each month of excess contributions.
Know your tax free savings account limit for 2013 before making a contribution as there is a Tax-Free Savings Account (TFSA) Tax Return which must be filed by no later then June 30 of the year to report and pay tax on excess TFSA amounts, or if you made contributions to a TFSA and you were a non-resident of Canada.
As you can see the Tax free savings account rules are a somewhat complicated and the penalty for over contributions are fairly large in comparison to what most of us are currently earning on our investments, so you should ensure that you know your limit for 2013 before you make contributions.
Additional information on tax free savings accounts limit 2013 can be obtained through your financial institution, investment advisor, toronto accountant or through the Canada Revenue Agency website.
