Tax-Free Savings Account

Tax-Free Savings Account

Tax-Free Savings Account (“TFSA”) is a great program which allows individuals to save and invest money without incurring taxes on the income generated within the account. Anyone can participate as long as you are a Canadian resident and 18 years of age. Your TFSA contribution starts accumulating once you turn 18 years of age.

 

What better way to save for your annual vacation, home renovations or to start a small business with no tax consequences when you withdraw your money.

The Tax-Free Savings Account is extremely flexible and there are an unlimited number of strategies to use it effectively:

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Consider using a TFSA to keep emergency funds invested and separate from your regular investment or bank account.

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Parents that have been contributing to their child’s Registered Education Savings Plan (“RESP”) (since birth) may have obtained all of the grants available and can use the TFSA to continue saving for their children’s education.

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For older individuals, you can continue to contribute to your TFSA even in retirement years; taking advantage of the tax-free growth and flexibility. Funds withdrawn from your TFSA do not count as income and won’t impact your Old Age Security pension recovery tax (“OAS”) or Guaranteed Income Supplement (“GIS”).

Why is it Beneficial to Open a TFSA?

  1. • Your contributions grows tax free!
  2. • Withdraw your money at any time for any reason without incurring a tax penalty.
  3. • If you don’t contribute the maximum annual amount, you can carry forward the unused contribution room to future years.
  4. • Any amount withdrawn from the account can be added back at a later year without reducing your contribution room.
  5. • You can provide funds to your spouse to invest in their TFSA depending on the spouse’s available contribution room.

What Kind of Investments can be Held in a TFSA?

A TFSA can hold the same type of investments as registered accounts: Mutual Funds, Stocks and Bonds.

What are the Contribution Limits for a TFSA?

How Does a TFSA Compare to a Registered Retirement Savings Plan ("RRSP")?

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