The TFSA contribution limit for 2021 and 2022 is $6,000 per year.
Tax Free Savings Accounts (TFSAs) are a type of investment savings account. They allow you to save and invest money that you are free to withdraw, tax-free at any time. Unlike RRSPs you do not get a deduction for contributing money to the plan, but also unlike RRSPs you are not taxed on withdrawals.
This means that any income earned while invested in your TFSA is tax-free. There are limits to contributions each year, but the good news is, if you haven’t contributed yet, or if you have missed some years, your limit simply carries forward and you do not lose out. Contribution limits will be noted on your tax assessment each year.
Contribution limits were $5,000 per year from 2009 through 2012, $5,500 per year for 2013 and 2014, $10,000 per year in 2015, $5,500 per year for 2016 through 2018 and $6,000 for 2019 through 2022. If you have never contributed to a TFSA then your limit would be $81,500 in 2022. Note the TFSA year functions on a calendar year basis.
You can set up TFSAs through any bank and most brokerage and investment companies. Your account can be set up using a structure whereby the investment company or bank determines what investments the plan will hold, or you can establish a self-directed TFSA. Such a plan will allow you to determine what investments your plan holds.
The way to make this work for you is to save what you can and make sound investments inside the TFSA. In the beginning you may want to simply invest in a GIC or other interest-earning investment. As your funds accumulate down the road, you may wish to diversify and spread the investment among the various types of investments available, from GIC’s or term deposits to stocks and bonds.
Like RRSPs there are penalties for over contributing. Pay attention to your limit and seek advice where necessary.
Learn more here: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/tax-free-savings-account/contributions.html