Limit on TFSA earnings?

[thankujesus]

So I put in $200 at the start of the year to trade options in my TFSA, I’m now close to $5,000. But this has me thinking, theoretically, if I ended up with $100,000 this year, or even a million,

What is the likelihood id get in shit from the CRA?

I’ve never professionally traded or went to school for finance if that matters.

It just seems like a huge loophole.

 

[ancv328]

@thankujesus If you trade frequently (eg. daily) in your TFSA, the CRA may consider it a business, and you could get into some trouble. But if you’re just buying and selling normally every few days (or more), they’ll probably leave you alone.

If you’ve turned $200 into $5,000, understand that you’ve gotten extremely lucky. Do not confuse that with talent, and definitely don’t count on that luck continuing to $100k in a short period of time.

 

[thankujesus]

@ancv328 Uh oh

 

[kwils858817]

@thankujesus You aren't likely to be penalized for what you've done.. but if you kept doing it and made a lot of money there's a good chance the CRA would look into it and it would no longer be tax free

I think you should also realize professionals rarely beat the market over the long term. It's extremely unlikely your good luck will continue in a similar fashion.

 

[aspatat]

@thankujesus I traded 10k into 60k and haven’t heard shit from them last tax season

 

[cmq8775]

@ancv328 Nah, he’s not lucky. This guy is just smarter than the folks at DE Shaw, Renaissance, Citadel, etc. /s

 

[jimmya617]

@thankujesus Wallstreetbets is over there

 

[hirono]

@thankujesus You can’t short term trade in a TFSA. You can get away with it for a time or if you haven’t crossed to it being a large sum of money that it hits their radar; but when they do catch on; they will go back and tax you on it all from the very start.

 

[aspie3000]

@thankujesus You'll get in trouble if you're day trading.

 

[pr0dr0me]

@thankujesus You can’t day trade in a registered account. You might be subject to taxes if the CRA sees this as day trading. Worst case scenario you would owe taxes on 100% of your profit if they see this as business activity.

https://www.fidelity.ca/en/insights/articles/day-trading-in-a-tfsa/

 

[lostgirlsp]

@thankujesus While the rules are intentionally left vague and open to interpretation, two things generally trip CRA:

• Frequent trading
• Speculative trading

If you have significant gains in a short period of time and can be deemed to have done either of the above, CRA may come knocking.

Options are inherently about speculation. The purpose of TFSA is for people to save long term and prepare for retirement, not to engage in activities that have a high likelihood of doing the opposite.

So yes, if you turn an inflow of $200 into a TFSA worth $100K while trading options, you are at risk of CRA lifting the tax advantages of your TFSA.

 

[purple5]

@thankujesus I’ve only found on Canadian article of a physician who the CRA claimed was running a business with his trades. They were fining him or whatever for 600 000 and he’s taking them to court. Otherwise with all the research I have done you are fine to trade as often as you like just no in the future the CRA could potentially decide to be cunts. I’m personally not worried about it for myself.

 

[resjudicata]

@thankujesus It’s all getting taxed by CRA lol

 

[melindapurcell]

@thankujesus Congrats on the returns but you should probably do a bit more due diligence if you want to continue managing your investments

 

[thankujesus]

@melindapurcell I’ve tried looking into the specifics of a TFSA but it’s a gong show on the internet. Very vague and scenarios like this don’t seem to covered

 

[chisel]

@thankujesus https://financialpost.com/personal-finance/taxes/cra-looking-people-day-trade-investments-tfsa

 

[traininggrounds]

@thankujesus It’s not vague at all . Don’t trade options in your TFSA if you don’t want the CRA coming after you for running a business inside your account. Pretty simple

 

[roberte]

@traininggrounds The definition of pattern and day trading is actually deliberately vague in the wording of the law.

 

[emyde23]

@thankujesus Most accounts that started when available are now in the $200k range with a percentage above that. Don’t worry about it.

 

[elliott527]

@thankujesus When u get to a million you retire, keep going… simple.