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Tax Free Savings Account (TFSA)

As announced in the 2008 Federal Budget, the newly created Tax Free Savings Account (TFSA) provides the opportunity for tax free growth for Canadians over the age of 18. Beginning in January 1, 2009 you can save and invest money without having to pay tax on any of the interest it earns. Withdrawals from your account are also tax-free and can be made any time for any purpose.

Contact us today to find out how you can get started with your Tax Free Savings! Options include:

  • TFSA high interest savings account with variable rate
  • Term deposits over 90 days to five years with fixed rates (view current rates)

Here are some basics on the TFSA*:

  • The TFSA is a new savings account, registered with the Canada Revenue Agency
  • Individuals 18 and older with a valid SIN can contribute up to $5,000 in 2009 and each year after; this amount will be annually indexed to inflation to the nearest $500
  • There is no maximum age restriction
  • Amounts in the TFSA will not impact your eligibility for income-tested benefits or credits
  • Eligibility is based on your Notice of Assessment from the CRA, so even if you (or a child 18 years old or older) had no income, you should still submit a Nil return in order to allow your contribution room to grow for the future
  • Unused contribution room accumulates and is carried forward from year to year
  • Contributions are not tax deductible
  • The interest income and capital gains earned in the account grows tax-free (not reported as taxable income)
  • Withdrawals can be made any time, tax-free (not subject to withholding tax)
  • Any amounts withdrawn increase the contribution room for the following year
  • You can appoint a spouse or someone else as a beneficiary of the account
  • Only the accountholder can make contributions
  • It is the responsibility of the accountholder to ensure the contribution limit is not exceeded; if you do over-contribute, that amount will be subject to a tax of 1% per month until the amount is withdrawn
  • You can hold the same types of saving/investing vehicles in a TFSA hat you do in an RRSP or RRIF (term deposits and GICs; index-linked deposits; mutual funds; publicly-traded securities; bonds; etcetera)
  • Deposits in a TFSA held at a credit union will be separately insured up to $ 100,000. (Source: Deposit Insurance Corporation of Ontario (DICO) www.dico.com)

How is a TFSA different from a Registered Retirement Savings Plan?

  • Contributions to an RRSP are deductible and reduce your income for tax purposes. In contrast, your TFSA savings will not be deductible.
  • Withdrawals from an RRSP are added to your income and taxed at current rates. Your TFSA withdrawals and growth within your account will not – they will be tax-free.

*Source: Canada Revenue Agency:
http://www.cra-arc.gc.ca/gncy/bdgt/2008/txfr-eng.html