How to save thousands of dollars in tax using a TFSA

You can save up to $5,000 every year in TFSA. Limits are going to be indexed to inflation in $500 increments, so watch for increases in limits over time. You can have as many TFSAs as you wish, but the $5,000 contribution limit applies across all accounts. Note that Contributions are NOT tax deductible but all the income earned inside a TFSA is earned tax-free. Moreover If you can’t save $5,000 this year, your contribution room can be carried forward to future years. So if you can only stick $2K in for 2012, in 2013 your limit will be $8,000 ($5K for 2013 and $3K carried forward from 2012). One must remember he can take money out of TFSA at any time for any purpose, without losing the contribution room. HOWEVER if you take money out in one year, you CANNOT put it back until the following year. You can hold any investment you can buy for your RRSP inside your TFSA, including stocks, bonds, GIC, and mutual funds. You can, and should, make a beneficiary designation (everywhere in Canada except Quebec) on your TFSA to avoid probate costs. You can contribute to your spouse’s TFSA without affecting your own contribution limits and without any tax attribution. Follow the rules carefully, especially the one about taking money out of a TFSA and then putting it back in. If you try to return money to your plan too soon and you’ve already reached your limit for the year you’ll be hit with an over-contribution penalty