The total lifetime contribution a Canadian can put into a TFSA as of
January 1, 2015 is $36,500. So the fact that you have already put in
$5,000 leaves you with allowable contribution room of $31,500. As for
investments, you can invest those funds in holdings very similar to that
of a self-directed RSP or RIF. They can be individual stocks, bonds,
mutual funds, ETFs, structured notes, stripped bonds to name a few. Any
income and growth that these investments yield is not taxable when sold
or received into the account. When there is a loss of capital, then the
loss is not declarable on your return against other non-registered
capital gains, so be wary of this when investing in speculative
investments that may not work out to make you money.
As for the
contribution, it sounds like in your case you have cash to contribute.
If you didn’t, you could contribute an investment from a non-registered
account and it is deemed to be the current market value on the day of
contribution. If that investment has a capital gain, it must be declared
on your income tax return as such for that year. If there is a capital
loss since you are still the beneficial owner, you could not declare the
loss, unfortunately. This is the same rule that is applied when making
contributions "in kind" to an RSP.
You should also explore (if you
haven’t already) contributing into an RSP, providing you have
contribution room. The RSP is also a tax-sheltering opportunity with the
benefit of reducing your taxable income. There are specific benefits
unique to the RSP and TFSA. One contributes pre-tax income to an RSP
versus after-tax dollars into the TFSA. The RSP allows for the receipt
of U.S. income without being subject to a non-resident withholding tax;
the TFSA does not. Any income from a U.S. source earned in a TFSA is
subject to the 25-per-cent non-residency withholding tax, which can be
reduced to 15 per cent by filing the W8BEN form with the IRS. These are
the major differences to be aware of.
There are many options for
the types of investments you can own in a TFSA, so it would be wise that
you seek investment planning advice before doing so. For some
investors, it makes sense to own their interest-paying fixed income in
it; for others it makes sense that they own equities. Everyone’s
situation can be different, so get professional advice and a review of
your overall investment portfolio to figure out what type of investment
is best in what type of account.
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