January 6, 2012

Tax Free Savings Accounts

Introduced by the Canadian Federal Government in 2008 and initiated in 2009, the TFSA is a flexible investment savings account that allows clients to earn tax-free investment income.

Features and benefits:

  • Available to individuals age 18 or older with a Social Insurance Number
  • Contribute up to $5,500 per year (regardless of earned income)
  • May have more than one TFSA but maximum contribution room applies
  • Contributions are not tax deductible
  • Earned investment income, dividends, capital gains or losses are not included in taxable income
  • Withdrawals are not taxable
  • Use the withdrawals for any purpose
  • Carry forward unused contribution room indefinitely, like a RRSP ($5,000 per year from 2009 to 2012 and $5,500 2013 – 2014, $10,000 in 2015 and $5,500 in 2016)
  • Contribution room can be recovered in full due to withdrawals, the year after the withdrawal
  • Eligible investments include: daily interest funds, guaranteed interest funds (GICs), high interest savings accounts, segregated funds (bonds, fixed income and equities)
  • Can be assigned as collateral