A Fresh Approach to Your Savings

***SPECIAL 16 MONTH TERM TAX-FREE SAVINGS ACCOUNT AT 1.70%***

 

Tax-Free Savings Account (TFSA)

The Federal Government has introduced a new registered savings account that allows taxpayers to earn investment income tax-free.  TFSA allows taxpayers to set money aside in eligible investment vehicles and watch those savings grow tax-free throughout their lifetime.

There are no restrictions on the way TFSA funds (contributions and earnings) may be used (ie. purchase a car, renovate a home, start a small business, take a family vacation, or just save for "a rainy day").  All income levels and all walks of life can benefit from a TFSA.  But only a careful review of each person's financial situation will determine how to optimize use of RRPs, RESPs, RRIFs and TFSA.

 

For further details on this product or to open a TFSA please come in and visit with one of our knowledgeable staff today!

 

TFSA Eligibility

The individual owning the TFSA is the "Holder".  Any individual person (not trusts or corporations) who meets all of the following three requirements is eligible to open a TFSA:

  • Resident in Canada, and
  • 18 years of age or older, and
  • Holds a valid Social Insurance Number (SIN)

 

TFSA Contribution Limit

Contributions to a RFSA may only be made by the Holder and the amount is not tied to the income of the Holder.

  • $5,000 is the maximum TFSA contribution limit for each year beginning in 2009.
  • After 2009, the $5,000 maximum contribution limit may be increased depending on the rate of inflation; rounded to the nearest $500 e.g. if the rate of inflation in 2009 is 5.1% in 2010, the maximum would increase to $5,500 ($5,000 x 5.1% = $255; nearest $500 is $5,500).  Therefore the limit will increase some years, but not every year.
  • Contributions are not tax deductible.

 

TFSA Unused Contribution Room

When a TFSA Holder contributes less than the maximum contribution limit, the difference is referred to as "unused contribution room".

  • Unused contribution room will accumulate each year.
  • Unused contribution room is carried forward indefinitely, allowing the Holder to "catch up" by contribution more than the maximum contribution limit in a future year.
  • A TFSA withdrawal will increase the contribution room for the year after withdrawal.  As a result, when amounts are withdrawn from a TFSA they can be re-contributed in the future when funds become available.
  • Canada Revenue Agency will confirm the contribution room on the annual Notice of Assessment.

 

Qualified Investments

 The types of eligible investments are restricted under the Income Tax Act and include:

  • Term deposits and GICs
  • Variable interest savings accounts
  • Credit union shares
  • Index-linked term deposits
  • Mutual funds
  • Publicly traded securities
  • Bonds

 

Withdrawals

  • TFSA Holder may withdraw funds at any time; withdrawals may be restricted by investment terms.
  • Withdrawals are not reported as taxable income and are not subject to income tax.
  • TFSA withdrawals of contribution/earnings will increase contribution room for future years, but not the current year.
  • Withdrawals will not impact eligibility for federal income tested benefits and credits (e.g. OAS, GIS, Age Credit, GST, EI, child-tax benefit, working income benefit).
Investments