A Tax-Free Savings Account (TFSA) lets Canadians take advantage of tax-free savings. It's the single most important personal savings vehicle since the introduction of the Registered Retirement Savings Plan (RRSP).
Any resident of Canada who is at least 18 years old is eligible for Tax-Free Savings Account (TFSA). As long as you are eligible, you can contribute to a TFSA. You don't need employment income to accumulate TFSA contribution room.
Starting in 2009, you can contribute up to $5000 to your Tax-Free Savings Account (TFSA). After 2009, annual TFSA dollar limit will be indexed to the inflation rate.
Contributions to a TFSA will not be deductible for income tax purpose but you pay no tax on the investment income or growth generated in your TFSA.
You can make withdrawals from your TFSA at any time for any purpose and you don't need to pay any tax.
Unused TFSA contribution room can be carried forward to future years. The withdrawn can be put back in the TFSA at a later date without reducing your contribution room. Your annual contribution room will be indicated on your notice of assessment.
Neither income earned in a TFSA nor withdrawals will affect your eligibility for federal income-tested benefits and credits.
You can make contributions to your spouse's TFSA. TFSA assets can be transferred to a spouse upon death.
If you make excess contributions, you will be subject to a tax of 1% per month on the highest excess amount.
If you borrow to invest in a TFSA, the interest on money borrowed is not tax deductible.
The TFSA offers many tax advantages. It should be incorporated in your overall tax planning strategies.
