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Tax-Free Savings Account (TFSA)

  • Available January 1, 2009.
  • Open to all Canadian residents 18 years of age and older.
  • Annual contribution limit for 2009 is $5,000
  • Annual contribution limit for 2010 and beyond is $5,000 plus unused contributions from the previous year plus any withdrawals from the previous year.
  • Excess contributions are taxed at 1% per month.
  • No restrictions on withdrawals.
  • Contributions and withdrawals have no effect on taxes or income levels. Contributions are not tax deductible and withdrawals and income earned are not taxable.
  • The TFSA has no effect on income-tested benefits such as Child Tax Benefit, GST credit, age credit, OAS, GIS, EI.
  • No attribution - opportunity for income splitting, even with children over 18.
Suggestions for maximizing benefits of a TFSA
  • Emergency funds held in cash should be put into a TFSA as this can ultimately double investment return for those with higher taxable incomes.
  • Fixed income components of a non-registered portfolio should also be put into the TFSA. Investments such as GICs, bonds and even balanced funds should be considered for the TFSA.
As an added resource, try the government's Tax-Free Savings Account Calculator.

Look at adding a TFSA to your portfolio. Contact your Moneystrat financial planner to find out more. Don't have one? Contact a financial planner today for a no-obligation consultation.

Case Study:
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