TFSA 1

TFSA

In January 2009, the government of Canada set up a plan that enables individuals to access Tax Free Savings Accounts (TFSAs).  These savings accounts allow the holder to earn investment income,

without paying tax on this income.

 

If you are 18 years of age or older, you can take advantage of TFSAs, even if you are not a business and do not have a professional bank account.

TFSA features:

  1. Allow you to increase your savings without paying income tax on income derived from the invested income.
  1. Up to $ 5,500 dollars can be invested each year and for each person in the account – for a total of $11,000 and any unused annual limits can be replenished in the following years.
  2. You can take money out of the account any time you want.
  3. In the event of a death of your spouse, funds can be transferred into the surviving partners account.
  4. Contributions to your TFSA are after-tax funds and money from the account is never taxed, unlike funds from pension plans

Funds from a TFSA can be transferred from one bank to another without any trouble. All you need to do is complete a transfer application form, instead of withdrawing the money directly.

It is important to know that any investment income earned through a TFSA or contributions withdrawn from the TFSA won’t affect the benefits you receive from the government. The only thing that matters, in this case, is your annual income. Guaranteed Income Supplements and The Canada Child Tax Benefit are benefits not affected by your TFSA. For families with low incomes, it is especially important that they are aware of this!

Funds that are in a TFSA are invested (like an RRSP) in things like stocks, bonds and funds.

There are some restrictions, however, which you should be aware of.  If you withdraw money from your TFSA account and decide to put it into another TFSA, at another bank, if the amount exceeds your annual limit you will receive a penalty.

 

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