TFSA - Tax Free Savings Account

Top 10 Things to Know about TFSA - Tax Free Savings Account

1/ Starting in 2009, Canadian residents who have attained the age of majority (as determined by the laws of their home province) will be eligible to contribute up to $5,000 annually to a TFSA, with unused room being carried forward.

2/ Contributions will not be deductible.

3/ Capital gains and other investment income earned in a TFSA will not be taxed.

4/ Withdrawals will be tax-free and will create contribution room for future savings.

5/ Neither income earned within a TFSA, nor withdrawals from it will affect eligibility for federal income-tested benefits and credits, like the Child Tax Benefit, Guaranteed Income Supplement, Old Age Security benefits, Age credit, or Goods and Services Tax credit – so you're not penalized for saving.

6/ Just like an RRSP, when you file your tax return each year, the government will determine your remaining available Tax Free Savings Account contribution limit for the coming year.

7/ Contributions to a spouse's or common-law partner's TFSA will be allowed, and TFSA assets will be transferable to the TFSA of a spouse or common-law partner upon death.

8/ Qualified investments include all arm's-length RRSP qualified investments.

9/ You can have more than one Tax-Free Savings Accounts, and you can also have Tax-Free Savings Accounts with more than one financial institution providing your contribution to all TFSA accounts do not exceed $5,000.

10/ The Tax-Free Savings Account comes into effect in Canada January 1, 2009, but you can open TFSA Account with your Investment Advisor today.

Pavol Hollosy, Investment Advisor