Tax Free Savings Accounts
Tax Free Savings Accounts (TFSAs) have become popular with Canadian investors since they were announced.
These flexible accounts enable investors to accumulate investment income and capital gains that are fully tax-sheltered.
Tips and Traps
Deposit exceeding the available contribution room for the year will be taxed at 1% per month on the excess. Investors should not re-deposit funds in the year of withdrawal, as they may exceed the available contribution room for the year. Investors should review, and consider suspending, any Pre-Authorized Contribution plans.
- Individuals can now contribute up to $5,500 per year to a TFSA
- Unused contribution room can be carried forward to future years
- Funds provided to a spouse for contribution are not subject to income attribution rules
- Available funds can be withdrawn from a TFSA at any time for any purpose
- Amounts withdrawn from funds can be re-contributed without reducing the contribution room
- Income earned within and withdrawn from the account is not taxable