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TFSA Interest Formula:
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The TFSA (Tax-Free Savings Account) interest calculation determines how much your investment will grow over time through compound interest. All earnings in a TFSA are tax-free, making it an attractive savings vehicle for Canadians.
The calculator uses the compound interest formula:
Where:
Explanation: The formula calculates how your initial investment grows with compound interest, where interest is earned on both the principal and accumulated interest.
Details: Understanding compound growth helps Canadians maximize their TFSA benefits, plan for financial goals, and make informed investment decisions while enjoying tax-free earnings.
Tips: Enter principal amount in CAD, annual interest rate as a percentage, select compounding frequency, and time in years. All values must be positive numbers.
Q1: What is the current TFSA contribution limit?
A: The annual TFSA contribution limit changes each year. For 2023, the limit is $6,500. Check the CRA website for current limits.
Q2: Are TFSA earnings really tax-free?
A: Yes, all investment income, capital gains, and interest earned within a TFSA are completely tax-free, even when withdrawn.
Q3: What's the difference between TFSA and RRSP?
A: TFSA contributions are made with after-tax dollars and withdrawals are tax-free. RRSP contributions are tax-deductible but withdrawals are taxed as income.
Q4: Can I lose money in a TFSA?
A: Yes, if you invest in volatile assets. The TFSA is a registered account type, not an investment itself. Investment risk depends on what you hold within the account.
Q5: Do unused contribution rooms carry forward?
A: Yes, unused TFSA contribution room accumulates indefinitely and carries forward to future years.