Can you contribute to your spouse’s TFSA?
No, you can’t contribute to your spouse’s tax-free savings account (TFSA). Only the named account holder can contribute and withdraw from their TFSA. However, you can gift them money that they may choose to put into it. This is also the case with common-law partners.
Let’s look at an example. Greg and Elizabeth are married and living in Toronto in 2024. Greg has maxed out his TFSA contribution of $7,000, and so decides to gift his wife $6,000 to add to hers. Elizabeth hasn’t contributed anything to her own TFSA for that calendar year. Since she’ll be contributing $6,000, she’ll still have $1,000 contribution room for the year. If she doesn’t use that contribution room, she’ll be able to roll it over to the following year.
Because Greg gifted this money to his partner Elizabeth and they’re both within their contribution limits, they can both benefit from tax-free growth and tax-free withdrawals.
It’s important to note that this example assumes there is available contribution room for the receiving partner (Elizabeth), and both partners adhere to the annual TFSA contribution limits set by the Canada Revenue Agency.Opens a new website in a new window
Spousal RRSPs can be a good option
While there’s no savings product that lets you directly contribute to your spouse’s TFSA, another strategy that spouses could consider is a spousal RRSP. A spousal registered retirement savings plan (RRSP) lets married and common-law couples:
- Even out retirement savings between 2 partners
- Split their income after they retire by withdrawing from their annuity or registered retirement income fund (RRIF)
- Reduce the amount of income tax they pay
How can you manage TFSA contributions together as a couple?
Along with gifting money to your spouse that they can use to contribute to their own TFSA, it’s also important to think about other ways to manage TFSA contributions together:
- Regular contributions: Consistency is key when it comes to investing. Make regular contributions to your TFSAs. This not only takes advantage of dollar-cost averaging but also helps harness the power of compounding over time.
- Diversification: Spread your investments across different asset classes to mitigate risk. Diversifying within the TFSA can help protect your contributions from the impact of a downturn in a particular market.
- Invest for growth: Since TFSA withdrawals are tax-free, consider allocating high-growth investments to your TFSAs. This can include stocks, equity-based exchange-traded funds (ETFs), or other growth-oriented assets. The tax-free nature of TFSA withdrawals makes it an ideal vehicle for long-term, high-return investments.
- Leverage your contribution room: Contribute the maximum allowed amount each year to take full advantage of your TFSA contribution room. The cumulative contribution limit has increased over the years, and staying within these limits could help you maximize the tax benefits.
What else can couples do to save for their future?
Couples have several options for saving for their future, and the right approach depends on things like your financial goals and risk tolerance:
- Joint savings accounts: Opening a joint savings account allows couples to pool their resources for short-term goals like a vacation, home downpayment, wedding costs, or emergency fund. It can also help for budgeting purposes and for making joint investments.
- Registered Retirement Savings Plans (RRSPs): RRSPs are designed for long-term retirement savings. Contributions are tax-deductible, and investment growth is tax-deferred until withdrawal. Couples can contribute individually to their RRSPs, and spousal RRSPs can provide income-splitting benefits during retirement.
- Employer-sponsored retirement plans: Contributing to employer-sponsored plans, such as a company pension or group RRSP, can be an effective way for couples to save for their retirement. Employer contributions and tax advantages could boost retirement savings.
- Life insurance and estate planning: Couples should consider life insurance to protect each other financially. Estate planning including wills and powers of attorney, can ensure that assets are distributed according to their wishes.