Can a TFSA help reduce tax as a self-employed Canadian?

A Tax-Free Savings Account (TFSA) is a registered account where your investments grow tax-free and withdrawals are not taxed. Unlike an RRSP, TFSA contributions are made with after-tax dollars, so they don't reduce your taxable income when you contribute. **Key TFSA facts:** - **2024 annual contribution limit:** C$7,000 per person - **Cumulative room since 2009:** C$95,000 (for those eligible since TFSA inception) - Investment income (interest, dividends, capital gains) earned inside a TFSA is completely tax-free - Withdrawals are tax-free and never count as income - Withdrawn amounts are added back to your contribution room the following year **How it benefits the self-employed:** Unlike RRSP contributions, TFSA doesn't directly reduce your 2024 tax bill. However, it's an excellent vehicle for: - Building a tax-free emergency fund for business cash flow gaps - Saving your estimated tax payments in a TFSA savings account to earn tax-free interest until April 30 - Long-term tax-free investment growth for retirement alongside RRSP You don't need earned income to contribute to a TFSA — any Canadian resident 18+ with a valid SIN can contribute.

  • TFSA contributions don't reduce current-year taxable income
  • All growth and withdrawals inside a TFSA are completely tax-free
  • 2024 annual limit: C$7,000; cumulative room since 2009: C$95,000
  • Great for building a tax payment reserve — earn interest tax-free
  • No earned income requirement — any Canadian resident 18+ can contribute

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