Tax Free Savings Account (TFSA)
Starting in 2009, Canadians will have a new way to save with a Tax Free Savings Account - a flexible, registered account that will allow Canadians to earn tax-free investment income.
The TFSA was introduced in the 2008 federal budget as an incentive for Canadians to save. The government is calling it the single most important personal savings vehicle since the introduction of the RRSP in 1957.
What is a TFSA?
An account where contributions are made with after-tax dollars and withdrawals are tax-free. This means that money can be earned in the account and withdrawn without being taxed.
Who is eligible to contribute to a TFSA?
Anyone over the age of 18 - even those without an income, or those over the age of 71, who are ineligible to contribute to an RRSP.
How does it work?
- You can save up to $5,000 every year in a TFSA. The $5,000 annual contribution limit will be indexed to the Consumer Price Index and rounded to the nearest $500.
- Unused contribution room can be carried forward indefinitely to future years.
- Any amount withdrawn from a TFSA is automatically added back to unused contribution room
- For those who maximize their RRSP contribution room each year, the TFSA provides extra room for tax sheltering.
- You can provide the funds for your spouse or your children over the age of 18 to contribute to their own TFSA.
Why offer a TFSA to your Employees?
- A plan member can save within a TFSA for any reason at all - whether for a short or long term objective.
- The TFSA offers withdrawal flexibility. Earnings in the TFSA can be taken as income tax-free, at any time and without limits
- The TFSA could be used to save for a down payment on a home. It may be more tax-efficient that the Home Buyers Plan.
- Members can use the payroll deduction feature to save in the TFSA.
For more information please contact: Michael Treurniet