TFSA Explained (Tax Free Savings Account) Canada | Tips to Maximize Your TFSA

[@DanishGhaziCPA]

What are your savings goals, for your TFSA?

[@DanishGhaziCPA]

My goal for the TFSA, is long-term wealth building

[@scottthompson3493]

As a bridge investment for my retirement.

[@DanishGhaziCPA]

@@scottthompson3493 that's a wonderful use!

[@tanyaperrin8844]

The TFSA is the best thing ever!

[@DanishGhaziCPA]

I agree, wish we could contribute more! Thanks for stopping by

[@rionp912]

Thx for the great explanation. A couple of questions: 1. You mentioned at the end, a down payment on a house is one good use. Comparing to an RRSP I can see the benefit. If you had the option between a regular cash account and TFSA is there any benefit? 2. Can you use the TFSA to make regular monthly payments to a mortgage and some how avoid the regular mortgage rate? Whether it is rental property or not

[@DanishGhaziCPA]

TFSA allows you to earn income tax free from the funds within the account. In a regular cash account, you may have capital gains tax, and pay taxes on distributions. Once you make contributions to a TFSA, you must follow the withdrawal rules, however, you can do whatever you'd like with the funds once they are withdrawn.

[@CarlosVazquez0]

I'm not from Canada, but thanks for sharing your knowledge bro, definitely helping many people learn about the right way to invest. Great video my man :)

[@DanishGhaziCPA]

I appreciate that! Thanks for the kind words 😀

[@JessieOpportunityCostInvesting]

Learned about the RRSP and TFSA today. I wish I could do this as a US citizen :/ This was very helpful thanks!

[@DanishGhaziCPA]

Glad it was helpful! Yes, unfortunately the 59.5 age limit does place more restrictions on US tax sheltered accounts. Thanks for dropping by.

[@LemonSaoUbon]

That's good to know Stay safe and have a good time

[@DanishGhaziCPA]

Thank you!

[@oreow804]

Thanks Danish! Nicely done and very helpful!

[@DanishGhaziCPA]

Glad you found it helpful! Please do share the channel and video, would appreciate the support 👍🏼

[@eArminCom]

Thanks Danish. I learned more about TFSA, but I still have some questions. Is it always a winner strategy to save some money in TFSA, or does this depend on your annual income? Does the amount reduce your income tax or doesn't have an effect on it? I suggest creating another beginner video on this playlist to discuss more about Canadian taxation rules first.

[@eArminCom]

Just found this video explaining about tax. 👍 kzbin.info/www/bejne/d6C8mYmefpWhsK8

[@tomhenderson4182]

Hi Danish, 1. What is considered day trading in TFSA and is speculative allowed in TFSA? 2. If I buy and/or sell multiple different stocks on the same day is that allowed? Let’s say I bought stock A,B,C to diversify my portfolio. 3. If I want to add addition shares to my current position of a stock then later that day or following day I decide to sell it maybe due to some news that fluctuates the price is that considered day trading? Increasing or decreasing a position in a stock is that allowed? 4. If I buy a stock and a day or a week or a month later some news came out for that stock that I think the stock price will go down in the near future and I want to sell the stock. Will that be considered day trading or breaking TFSA rules? 5. If I buy and sell the same stock or multiple stocks a few times a week or month is that considered day trading? Example: stock A 2 times, stock b 3 times, stock c 5 times for the past month. 6. Let’s say I want to hold a stock for long term, I bought 100 shares then maybe a few weeks later it went up by 20-30% on that day I want to reduce my position to 50 shares and sold 50 shares for the 20-30% profit, then maybe a day or a week later the stock went down 50% and I want to add my position so lower costs, and buy back 50 shares, would this be considered day trading or not allowed in TFSA? 7. If I bought a stock and held for maybe a month and one day it increased 10-20% and I sell it and went into a different stock. Would that be considered smart investing or day trading? Because maybe I feel that stock already reached its high and it might fall so I don’t want to invest in that anymore and go into a different stock for long term. Thanks

[@DanishGhaziCPA]

Hi Tom, Great question! This is something I always get questions on as day-trading is a very real concern within the account. In general, the TFSA is meant for "investment income" and not "business income", so if you're in the business of day-trading, I would suggest you use a non-registered account. There are no fixed rules on what the CRA considers day-trading within a TFSA as they would assess a variety of factors. If you're making multiple trades a day, every day and your purpose is day-trading, this could potentially get flagged. If your purpose is long-term investing and making a handful of trades every now and then, it shouldn't be an issue.

[@WifeStyleInKSA]

hello dear good job its very helpful and informative video dear good job keep smiling and stay connected 🤝🇸🇦

[@DanishGhaziCPA]

Thank you for watching!

[@lulzhh5177]

I need to know how to gain from TFSA and keep it completely halal. Please respond to me with what I need to know. I booked an appointment with bank to open TFSA account. Until now I have avoided investing all together to stay away from any haram. But now I see I need to think of how to make my money work and grow for me rather than sitting idle.

[@DanishGhaziCPA]

It’s awesome that you’re looking to make your money work for you while keeping it halal. Here are a few tips to get you started: Halal Investment Options: Look for Sharia-compliant funds or ETFs that steer clear of businesses involved in haram activities like alcohol, gambling, and interest-based finance. Dividend Stocks: Consider investing in companies that pay dividends and align with Islamic principles. Real Estate: Investing in real estate through your TFSA can be a great halal option if done correctly. If you want more detailed advice tailored to your situation, feel free to connect with me on Asqme. I’d be happy to help you navigate this further! -> Asqme.com/@DanishGhaziCPA

[@joshua_fry_speed9449]

New subscriber, thanks! You should do more video on best Canadian dividend ETFs!!!!

[@DanishGhaziCPA]

Thanks for your support! Will be delivering more of my top ETF picks. Stay tuned 🤠

[@atlresale8097]

Awesome video and explanation!

[@DanishGhaziCPA]

Thank you!

[@darkjedi447]

TFSA videos always mention investing in stocks when they explain how it works. I don't invest in stocks. Are you able to explain it without using stocks in your example please? That would help me a lot. Thanks and keep smiling🤘🙂

[@DanishGhaziCPA]

The concept behind a TFSA is the same no matter what assets you had, once you deposit the funds in your TFSA, your investment grows tax free, and once you withdraw, that balance gets added to your contribution room the following calendar year. Whether you treat your TFSA as a cash savings account or for stocks, the concepts are the same. Appreciate the positive feedback as well, thank you! Happy to answer any additional questions.

[@darkjedi447]

@@DanishGhaziCPA Thanks. That was very helpful. Appreciate it.👍

[@DanishGhaziCPA]

@@darkjedi447 Anytime!

[@zechen6879]

How does over contribution penalty work? Do I still have to pay penalty if after I overcontribute and the money in the TFSA is lost from poor stock investing? Please define excess TFSA contribution and how to offset or remove it if I do overcontribute?

[@DanishGhaziCPA]

As I mentioned in the video, over-contribution occurs when you contribute more than the room available in your TFSA. If your TFSA contribution room is 10k, you contribute 15k, that extra 5k is an overcontribute. The CRA will charge 1% per month on this 5k until you withdraw the funds or your TFSA rooms grows due to the annual dollar limit. To withdraw funds from your TFSA to offset an overcontribution, you might have to sell some of your holdings until you can withdraw enough cash to off-set. How well or poor your portfolio performs has no impact on the penalty as it's based on your contribution. Hope this helps! Thanks for stopping by

[@farhancpa]

You do taxes for IT contractors? I need some advice and looking to do work as a contractor by forming a corp.

[@DanishGhaziCPA]

I no longer practice public accounting, these days my focus tends to be financial planning & analytics along with financial literacy. If I can assist you in these areas, would be happy to setup a chat.

[@LuriVlog]

Tnx for sharing about TFSA

[@DanishGhaziCPA]

Glad you enjoyed it!

[@sdandrea5245]

If I were to fund my WealthSimple TFSA with $10 000, and then purchase some equities and etf's, etc. that exceed $10 000 of available funds (because say market orders get filled above market price shown, due to 15 min price delay), what would happen? I could not just contribute more funds to TFSA if I am at my contribution limit. To prevent this would always need to leave an uninvested cash balance.

[@DanishGhaziCPA]

Good question, the way it works is that if you don't have the funds to make your purchase it simply won't go through. If you're placing an order Wealthsimple will factor in a 5% cap in case of a hard spike

[@sdandrea5245]

@@DanishGhaziCPA Thanks for the prompt response Danish. Great videos and plan to subscribe!!

[@DanishGhaziCPA]

@@sdandrea5245 Glad to be of help!

[@chetan123negi]

Can an immigrant recently came to Canada as Permanent Resident and is of 18 years + age, having a valid SIN but who have stayed less than 183 days in Canada in the tax year is eligible to open a TFSA account ? Will he not be considered as " Non resident" for tax purpose and therefore ineligible for TFSA ? Kindly confirm.

[@jitupatel7846]

What is the rules for stock trading in TFSA without implication of tax?

[@DanishGhaziCPA]

In summary, A Tax Free Savings Account (TFSA) is a registered investment or savings account that allows for tax free gains. The amount of money that can be contributed to a TFSA is limited each year. A TFSA can be used for any savings goal and withdrawals can be made free of tax.

[@cosmobun]

Thanks for the video! Definitely clear up a lot of confusion! I’ve been told tfsa is great to use as an investment account (like you suggested), but I’ve also been told if I trade frequently, there are consequence or a penalty. Are you able to elaborate on that? Like is it true, and if so, how often is frequent? Thanks!

[@DanishGhaziCPA]

Glad it was helpful! My goal for the channel is to take these concepts that I've learned as a CPA and provide meaningful info to the public. In general, the TFSA is meant for "investment income" and not "business income", so if you're in the business of day-trading, I would suggest you use a non-registered account. There are no fixed rules on what the CRA considers day-trading within a TFSA as they would assess a variety of factors. If you're making multiple trades a day, every day and your purpose is day-trading, this could potentially get flagged. If your purpose is long-term investing and making a handful of trades every now and then, it shouldn't be an issue. Hope this helps!

[@tomkwan9218]

DG Capital thank you very much for the info! I certainly don’t have the knowledge to be a day trader, however, there are certain stocks I buy on a regular bases whenever I receive my paycheque (ie: Apple, Nikola..etc). This means I have activities 2-3 times a week. And if things don’t go well, I would release and sell the stocks. Would that be considered “frequent” and be flagged?

[@DanishGhaziCPA]

I wouldn't be worried about that. It's more so if you're doing multiple buys AND sell transactions every day for the sole purpose of benefiting from capital gains. In fact, I would commend you for investing every time you get paid, that's an incredibly good habit to building long-term wealth.

[@tomkwan9218]

DG Capital thank you very much for your insight! I will be sure to share this to all my friends!!

[@DanishGhaziCPA]

Much Appreciated!

[@Sherinthomas791]

bro I transferred some money from my personal account to TFSA .the money is sitting in TFSA .I did not buy any stocks but .Should I buy or leave it in the tfsa account?

[@DanishGhaziCPA]

Money sitting in a TFSA on its own won't do you any good. You're better off investing it or or you can withdraw the cash back out if you need to use it on something else. If you're looking for investment ideas, I have a few videos that you can use as a starting point.

[@nigelrivera281]

since i cannot access my cra account right now or contact anybody that works there,imma ask it here..ive been a permanent resident of canada since 2007 and been paying taxes since,became a citizen in 2016 and opened my tfsa on 2018...what would my contributuion room be? is it the sum total of the accumulated limit since 2009? or is it just the total from the time i opened my tfsa??(2018) cause if thats the case then im effed..

[@DanishGhaziCPA]

You start accumulating room in your TFSA when you turn 18 and are a resident in Canada, regardless of when you actually open an account. I would double check the hard copy of your notice of assessment from filling last year's taxes to see what your contribution room is.

[@wisegy2002]

You omitted a very important piece of information. Contribution space in a TFSA can be permanently lost. For example: If you purchase a stock within your TFSA for $5000 and that stock goes to $0 or the company goes out of business, that contribution room of $5000 will never be available to you again. In other words, losses resulting from poor investments do not create additional contribution room in your TFSA.

[@DanishGhaziCPA]

Which is why I included the formula: Contribution room = current year TFSA dollar limit + any unused TFSA contribution room from previous years + any withdrawals made from the TFSA in the previous year. Your contribution room is gone the moment you contribute and can only go up on withdrawals based on the amount you withdraw. If your 5000 stock goes to 0, you can only withdraw 0, which effectively means, 0 additional contribution room. Which is why its important to remember, withdrawals are not tied to stock performance, its based on the amount of cash available to be withdrawn.

[@integra8502]

Selling a stock within your TSFA without withdrawing it.... I can then rebuy more stock the next day if I want ?

[@DanishGhaziCPA]

The superficial loss rules do apply to TFSA and RRSPs. If you sold a stock you can’t buy back that same stock within 30 days. That’s whether or not you [then buy it for] your TFSA or RRSP

[@integra8502]

@@DanishGhaziCPA if the money is (not withdrawn from account), i cannot re invest right away ?? Is'nt withdrawing from account Very different than selling a stock and leaving money IN Account ??

[@DanishGhaziCPA]

@@integra8502 you or an affiliated tax payer can't buy the same stock but you're free to reinvest into other securities

[@pjourneys5337]

You say very interesting !

[@DanishGhaziCPA]

Thank you! 😃

[@Jay-kq8rl]

Im confused as too how many times I am allowed to trade within a TFSA, and when I have to pay taxes on a capital gain.

[@DanishGhaziCPA]

In general, the TFSA is meant for "investment income" and not "business income", so if you're in the business of day-trading, I would suggest you use a non-registered account. There are no fixed rules on what the CRA considers day-trading within a TFSA as they would assess a variety of factors. If you're making multiple trades a day, every day and your purpose is day-trading, this could potentially get flagged. If your purpose is long-term investing and making a handful of trades every now and then, it shouldn't be an issue. Capital gains only occur in non-registered accounts. You don't have to worry about capital gains if you are investing in a TFSA / RRSP

[@FarazAliSikander]

Very nice

[@DanishGhaziCPA]

Thanks

[@neoyelsuenocanadiense.1072]

If my TFSA grew to $250K and I withdraw everything... Year after I will have the $250K + year after contribution room?

[@DanishGhaziCPA]

In theory, yes, as withdraws are added to next year's contribution room

[@Bhupender296]

@@DanishGhaziCPA interesting! Would not it be calculated as your previous years contribution limit’s total instead ?

[@DanishGhaziCPA]

Good question, next year's contribution room is the federal limit + prior year's withdrawal

[@Bhupender296]

@@DanishGhaziCPA wow that means your TFSA limit can be close to sky if stocks goes 🚀. Good to know, thanks!

[@DanishGhaziCPA]

@@Bhupender296 Yes, this can happen! Some people already have million dollar TFSAs from getting lucky on high flying stocks

[@blazingcoder3196]

50% capital gains tax in a persona account??? Is that true?

[@DanishGhaziCPA]

Yes capital gains tax is currently set at 50% of your actual gain which then gets multiplied by your marginal rate. In other words, you only pay tax on half your gains and not the full amount

[@nitinbalyan4799]

if i sell and reinvest in tfsa, no withdrawal to bank, does it impact my contribution limits

[@DanishGhaziCPA]

Yes that's correct, think of a TFSA like a line in the sand, once you cross the line, doesn't matter what you do with the funds (except day trading) untill you cross back out (withdrawals)

[@nitinbalyan4799]

just to confirm, if limit is 10k and i purchased 10k worth of stocks than decided to sell and purchase something else, am i allowed to do that ?

[@DanishGhaziCPA]

Sure, there is nothing wrong with buying and selling stocks within a TFSA as long as your intention is not to use your TFSA for day trading. Multiple trades every single day for prolonged periods

[@patrickl.2761]

What if a person contributes the max. Makes an investment , loses money on that investment then need to withdraw. Is there now a low water mark on how much they can contribute back the next year ?

[@DanishGhaziCPA]

The contribution room that's added back for withdrawal is equal to the withdrawal itself. Irrespective of how your investments perform, if you withdraw 10,000 then you get this room added back the following year.

[@patrickl.2761]

@@DanishGhaziCPA Just to be clear. If I put in 50 k. It goes to 25k I withdraw it. Does that mean I can put back 25k plus 75500 which would be the limit for 2021?

[@DanishGhaziCPA]

The Lifetime contribution limit for the TFSA as of 2020 is 69,500. Let's say you contribute the entire 69.5K, and the value of the investment goes down to 10k. You withdraw 10k during 2020. In 2021, your limit will be 10k + 6k. The 6K being the new annual dollar limit.

[@patrickl.2761]

@@DanishGhaziCPA I thought so thank you.

[@DanishGhaziCPA]

Happy to help

[@nauman9002]

hi Danish, I have a bit confusion in withdrawal. Let's say if i contribute $1500 in my TFSA for my $6000 contribution limit for 2020 and invest in stocks worth 1500. Stocks appreciate and i make $200 - 300 profit in a month. Let's say in a month now i have $1700 in my account. Now this profit i can withdraw anytime without having any affect on my TFSA since i am not withdrawing the contribution of $1500 i made, rather the profit of $200. And this process can go on and on as long as i keep withdrawing my profits only. Am i thinking right or no? My plan is to open an account with Questrade, buy US stocks, once appreciates in a week , 15 days or in a month, sell them , book the profit and then withdraw the profit i make in a month or so in Canadian dollars. Please advise.

[@DanishGhaziCPA]

If you are looking to open an account with Questrade, use this referral link for a sign-up bonus if you're interested: bit.ly/3mgW7G3 In general, the TFSA is meant for "investment income" and not "business income", so if you're in the business of day-trading, I would suggest you use a non-registered account. There are no fixed rules on what the CRA considers day-trading within a TFSA as they would assess a variety of factors. If you're making multiple trades a day, every day and your purpose is day-trading, this could potentially get flagged. If your purpose is long-term investing and making a handful of trades every now and then, it shouldn't be an issue. TFSA withdrawal are added to next year's contribution room, so in theory, if your TFSA continues to grow, you can continue to withdraw. As there is no withdrawal limit except for the available balance within your TFSA.

[@nauman9002]

@@DanishGhaziCPA @Danish Ghazi CPA Yes, you are right. Infact i am not planning to day trade rather to trade once or twice a week unless i see a big opportunity where i do intra-day. So what you are saying that even if i withdraw my profit ONLY(considering the initial amount i deposited remains intact), the amount of profit withdrawal will be added next year in addition to the contribution amount. Lets say i contributed my max limit of 6000 in 2020 and i made profit on regular intervals. I withdrew my profit of $200 every month..for a total of 2400 for the year 2020. Now in 2021 my contribution room will be 6000 plus 2400(profit for 2020 which i withdrew).. I hope what i am thinking is right? Sure i am gonna use the link for Questrade. Right now there is another offer from National bank giving free trades for a year. My main concern is the conversion fee as i know that Questrade charges 2% conversion rate one time and then i can hold US currecny and can do US stocks..But figuring out how National Bank free commssion offer handles this conversion rate. Thankyou

[@DanishGhaziCPA]

When you're looking to withdraw from your TFSA, doesn't matter whats profit, what are contributions. As long as you have a positive balance in your TFSA, you can make withdrawals. Those withdrawals are then added to next year's contribution room. Just be careful when you're making many withdrawals and contributions, you don't want to get hit with over contribution penalties.

[@nauman9002]

@@DanishGhaziCPA 1/ Thanks Danish. The confusion is cleared now as i was considering the profit a separate entity . BUT my profit is NOT counted as Contribution. If, for e.g, i invest $4000 and make $500 profit , then this $500 is not counted in my contribution and I can still make remaining contribution of $2000 regardless i have $4500 in my account. 2/ And last thing that people who are on Social Assistance(Welfare) shouldn't be having any problem in opening up a TFSA account and do stocks? All people will be receiving TFSA taxslips whether they made some profit or NOT. 3/ Any comparison between National Bank and Questrade and if National Bank is giving free trades, its a better choice vs Questrade? Thanks and i appreciate all the info.

[@DanishGhaziCPA]

@@nauman9002 Yes if your "profit" continues to grow within your TFSA, you can withdraw the amount. There are restrictions and limitations on who can open a TFSA, which I covered in the video. Investing should only be pursued if you are able to take care of your other means. Don't risk money that you are not willing to lose. I personally prefer Questrade due to the interface and ability to purchase ETFs without transactions costs.

[@lichellecruz5744]

Can i day trade in my tfsa? If not, how many trade is allowed in a month or a year?

[@DanishGhaziCPA]

Day-trading is not allowed within a TFSA as this may be considered active business income. The purpose of the TFSA is for longer term investing/saving. The CRA does not limit the amount of trades one can make for it to be considered day-trading so its left open to interpretation. Thanks for stopping by!

[@lichellecruz5744]

I started investing in my tfsa last February, I bought stocks without knowing them well and they’re around 25 stocks. I started selling all of them. and now buying blue chip stocks for long term. Is it considered as day trading?

[@DanishGhaziCPA]

Day trading is when you're buying multiple securities and selling them in the same day or within few days and doing this consistently, day in and day out. If you're just reorganizing your portfolio and making a handful of trades in a week or month, then it's not really an issue.

[@lichellecruz5744]

I was worried about it sir, I really thank you for answering. More power to you😀

[@DanishGhaziCPA]

No worries, happy to help! Make sure to like, subscribe and Share 👌 really helps out

[@sangeetasvloglife980]

17like. New member. Stay connected

[@DanishGhaziCPA]

Thanks for your support!

[@dilrajsingh690]

who can open tfsa account?

[@DanishGhaziCPA]

Any individual who is 18 years of age or older and who has a valid social insurance number (SIN) is eligible to open a TFSA.

[@dilrajsingh690]

do you have to be a permanent resident?

[@DanishGhaziCPA]

@@dilrajsingh690 A person determined to be a non-resident of Canada for income tax purposes can hold a valid SIN and be allowed to open a TFSA, however, any contributions made while a non-resident will be subject to a 1% tax for each month the contribution stays in the account.