Tax-Free Savings Account (TFSA)
This registered savings account may be the most important personal savings vehicle introduced since registered retirement savings plan (RRSP).
- Available to Canadian residents 18 years of age or older.
- Annual contribution limit of $5,000 starting in 2009 (indexed to inflation for subsequent years).
- Contributions will not be tax-deductible.
- Any amounts withdrawn and any gains, losses or income generated by investments held within a TFSA will:
- Not be taxable.
- Not affect eligibility for federal income-tested benefits or tax credits.
- Be added to the contributor's TFSA contribution room for the following year (withdrawals only).
- Any excess contributions will be subject to a tax of one percent per month on the highest excess amount for the month.
- The annual contribution limit will be indexed to inflation annually and rounded to the nearest $500.
- Unused contribution room will carry forward indefinitely. TFSA's are a nice addition to other registered savings options. They will be particularly attractive to you if you have:
- Existing non-registered investment accounts that they could transfer to a tax-exempt TFSA.
- Have already maximized their RRSP contributions and are looking for alternative ways to enhance their retirement savings or shelter investment income.
- Seniors over age 71 who can't contribute to RRSP's.
- Have a low, modest income and feel that the deduction provided by RRSP contributions is of limited value.
- Wish to preserve income-tested benefits.
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