Tax Free Savings Account (TFSA)
Tax Free Savings Accounts (TFSA) were introduced in the 2008 Federal Budget effective January 1, 2009 to help us save and invest for our future. Canadians who are 18 years of age or older may contribute up to $5,500 per year to a TFSA. TFSAs are great because the earnings are tax-free. In Canada, only your principal residence and your TFSA are true tax free investments.
Here are the highlights:
- Your TFSA contribution can go to a wide array of savings or investments, such as a savings account, GICs, Mutual Funds, etc.
- The unused contribution room can be carried forward, so if you can’t make the full $5,500 contribution one year, you can catch up in a subsequent year.
- Withdrawals are tax free and the earnings are too.
- Unlike RRSPs, if you make a withdrawal from your TFSA one year, it creates new room. You can therefore put the amount withdrawn back into the plan in a subsequent year
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