Investment Info: Tax-Free Savings Accounts

posted: December 30, 2008

From January 1, 2009, Canadians now have another savings vehicle to consider. Tax-Free Savings Accounts (TFSAs) allow Canadian residents (18+) to contribute up to $5,000 a year without being taxed on the investment income or capital gains. However, unlike RRSPs, your contributions are not tax-deductible. Here are some of the features of the TFSA:

Contribute up to $5,000 per year
Investment income is tax-free
Withdraw funds at any time without being taxed
There are a variety of investment options available (GICs, Mutual & Segregated Funds, Stocks)
Unused contribution space is carried forward each year indefinitely

Who should consider a TFSA?

A TFSA can serve a variety of people to help them with their financial goals. For example, individuals who have contributed the maximum allowable amount to their RRSP now have another tax-shelter savings vehicle if they wish to save more tax-free. TFSAs can also be used for those setting aside some money for a big purchase in the future or simpy as an emergency/rainy day account or for income-splitting with a spouse.

For more information, please visit the Canadian Federal web pamphlet on TFSAs: