Personal Retirement & Savings:
Tax-Free Savings Account (TFSA)
Tax-Free Savings Accounts are completely flexible, making them great for short-, medium-, and long-term goals, such as a car, a home down payment, vacations, education, or for retirement. This type of account allows you to invest without being taxed on the interest, or on the earnings.
Who can open a Tax-Free Savings Account?
If you’re a Canadian citizen over the age of 18 and have previously filed a tax return, you can open a Tax-Free Savings Account.
How much can I contribute?
At first, your annual contribution room is $5,000, but that may increase with inflation. Unused contribution room is carried over to the following calendar year, however. If you withdraw funds, you’ll get that amount back in contribution room the following year. While Tax-Free Savings Accounts are only available as individual plans, you can appoint a beneficiary without affecting their contribution room.
What happens if I over-contribute?
A penalty of 1% per month will be charged on the amount over your accumulated contribution room by the Canada Revenue Agency.
What about taxes?
Income earned in a Tax-Free Savings Account, as well as withdrawals, will not affect your eligibility for federal income – tested benefits and credits. Growth and interest within the account remain tax-free.