who said taxes are one of the certain things in life?
Kick your savings into high gear! With a Tax Free Savings Account (TFSA) you can be watching your new big screen television, cruising around in your new car, or taking your dream vacation even sooner as your savings grow that much faster.
Introduced by the Government of Canada in 2009, a TFSA allows you to save money without paying taxes on earned interest, so your money grows more quickly. Unlike other registered plans, you can withdraw your money whenever you want without being taxed. Up to two free withdrawals can be made per month and standard transaction fees will apply for any additional withdrawals.
Sounds good, but we bet you still have a few questions. Don’t worry – we have answers! Here are some common questions we get about TFSAs:
How does the TFSA work?
- From 2009 to 2012, Canadians age 18 or older were able to contribute up to $5,000 each year. From 2013 to 2014, the contribution limit was $5,500. Beginning in 2015, the contribution limit has been increased to $10,000 per year.
- Investment income earned, including capital gains, will not be taxed, even when withdrawn.
- Unused TFSA contribution room can be carried forward to the following year. There is no limit to how much contribution room can be carried forward.
- Funds in a TFSA plan can be withdrawn at any time for any reason without being taxed.
- If you take money out of your TFSA, you get the contribution room back the following year.
- There is no maximum age limit to open or hold a TFSA.
What types of investments are eligible for a TFSA plan?
You can hold a wide range of investments in your TFSA plan including our Superior Savings account, term deposits, mutual funds, etc.
What are the differences between a TFSA and an RRSP?
Unlike RRSPs, funds from your TFSA are not added to your income, which means they are not subject to income tax. Interest earned on any contributions is also not taxed and can be withdrawn at any time, for any reason. While RRSPs are tax deductible, contributions to a TFSA are not deductible for income tax purposes.
Want more information?
If you’d like to know how a TFSA may fit into your savings and investment plans, contact any of our branches. Additional information is also available on the Canada Revenue Agency’s TFSA website.
And, as always, don’t hesitate to give us a call. We’d be happy to answer any additional questions you may have regarding a TFSA or any other investment products we offer.
Please note: a $100 fee will be applied to any full or partial registered product transfer out.