Do more with your savings.
The Tax-Free Savings Account (TFSA) program began in 2009 as a way for individuals who are 18 and older, and who have a valid social insurance number, to set money aside tax-free throughout their lifetime. It is one of our most popular plans today, and is designed to help you save for now, and for the future. If you’re saving for a short-term purchase such as a vehicle, appliance, or a down payment on a house, a TFSA is a great option. It’s also ideal for seniors who are not eligible to contribute to a Registered Retirement Savings Plan (RRSP) because of their age, as there is no age limit on contributions to a TFSA.
It’s easy to withdraw money from an TFSA, and contributions to a TFSA are not deductible for income tax purposes. Any amount contributed as well as any income deductible for income earned in the account (for example, investment income and capital gains) is generally tax-free, even when it is withdrawn. Administrative or other fees in relation to a TFSA and any interest or money borrowed to contribute to a TFSA are not deductible.
It’s also important to be aware of the rules and restrictions when it comes to contributions, withdrawals and transfers relating to a TFSA:
- You can contribute up to your TFSA contribution room. A tax applies to all contributions exceeding your TFSA contribution room
- Withdrawals will be added to your TFSA contribution room at the beginning of the following year
- You can replace the amount of the withdrawal in the same year only if you have available TFSA contribution room
- Direct transfers must be completed by your financial institution
If you’re considering opening a TFSA, or have any additional questions, reach out. We’d be happy to help.