If you’re looking to grow your savings without worrying about taxes, our TFSA Calculator can help. It’s an easy tool that shows you how your savings can grow over time without any tax on the interest, dividends, or capital gains. No complicated formulas, just simple results. Let’s see how it works.

How TFS Calculator Works?

Almost all of the TFSA calculators in different countries work similarly, with a focus on local tax laws, investment options, and contribution limits. This calculator will help you estimate the growth of savings in such an account. Let me explain in detail how a tax-free saving calculator works:

Input Variables

Users enter various parameters such as their annual contribution amount, expected rate of return on investments, and the number of years they plan to invest. Let me explain it in detail:

  • Initial Investment : The amount of money you initially invest in the TFSA.
  • Investment Period: The TFSA calculator also includes the investment period. This refers to the number of years you plan to keep the money invested.
  • Monthly Contribution : The amount of money you plan to add to your tax-free savings account each month.
  • Lifetime Contribution Limit : The total lifetime limit for users is R500,000.
  • Annual Contribution Limit: Users have a contribution limit, which is about R36,000 in South Africa. Keep in mind that if you contribute more than the TFSA limits established by the South African government, any excess amount will be subject to a substantial tax penalty of 40%.
  • Expected Rate of Return: The average annual rate of return you expect from your investments.

Calculations

  • Total Contribution: This refers to the sum of all monetary inputs into the tax-free savings account over a specified period.
  • Growth Estimation: This involves projecting how your savings will increase over time due to the application of compound interest. Compound interest means that not only the initial amount invested but also the interest earned on that amount, as well as on subsequent contributions, will earn interest. The growth estimation uses a compound formula to predict the future value of your savings.
  • If you're planning for the future, consider using our Provident Fund Tax Calculator to see how retirement savings affect your taxes along with tax-free investments

Output From a Tax-Free Saving Calculator

Total Amount Saved

This figure represents the estimated total value of your TFSA at the end of the investment period. It includes the initial amount invested, all subsequent contributions you have made over time, and the compound growth achieved through capital gains, interest, and dividends. Simply put, it displays the cumulative sum of all contributions and their growth within the TFSA.

Total Interest Accumulated

The total earnings generated from your TFSA investments over the investment period you selected. It includes interest earned on the initial investment and dividends from stock or mutual funds in the TFSA.

Tax-Free Saving Account Contribution Limits

Do tax-free savings accounts have any limit? Yes, they do. TFSAs offer a great and safe way to secure your future, but it is necessary to stay aware of your contribution limits set by the South African government.

The annual TFSA contribution limit is R36,000 per tax year, with a lifetime limit capped at R500,000. Once you have reached the lifetime contribution limit of R500,000, you cannot make any additional investments in a tax-free savings account.

  • Annual Limit: R36,000
  • Lifetime Limit: R500,000

You can divide the annual limit of R36,000 across multiple accounts, provided the total contributions don’t exceed this threshold. For example, if you’ve invested R10,000 in one tax-free savings account, you can contribute up to R26,000 to another. However, unused contributions cannot be carried over to the next tax year.

Tax-fee savings account lets you grow your money without paying taxes on the returns. Begin planning now and use a TFSA calculator to maximize your investments.