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Tax-Free Savings Account — save money, tax-free | print this page | |||
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The Tax-Free Savings Account (TFSA) is available to Canadian residents who are at least 18 years of age1 to contribute up to $5,000 a year2 and earn tax-free investment income. The TFSA is now available from TD Canada Trust. Contributions aren’t tax deductible, but income and growth earned inside your TFSA won’t be taxed, and withdrawals are tax-free. Many benefits You have a wide range of investment options available for your TFSA, and it can be a great way to save for both short-term and long-term goals. You can use your TFSA savings to buy a new car, pay for school, take a vacation, finance home renovations, save for a down payment, or put more money away for retirement or a rainy day. You can access your money tax-free anytime3 and re-contribute any amount you withdraw4 in following years. Unused contribution room can be carried forward indefinitely. Many Canadians will find a TFSA is a great way to supplement retirement income by complementing a Retirement Savings Plan (RSP) or Retirement Income Fund (RIF). However, an RSP may still be the first choice for retirement savings, depending on your specific situation. Unlike a TFSA, RSP contributions are tax-deductible.
Annual contributions of $5,000 over 20 years, at 5% interest, can earn
Tax-free income A TFSA can be used to generate income tax-free, without your having to worry about moving into a higher tax bracket and potentially receiving less federal government benefit money (such as Old Age Security) from programs that are dependent on income levels. 1 "The holder of a TFSA with TD must be of the age of majority in their province of residence."2 "2009 contribution limit. This limit is indexed to inflation." 3 "Some restrictions may apply, depending on the investments chosen." 4 "The amount you withdraw can be re-contributed to your TFSA the following year without impacting your contribution room." 5 "The illustration is based on the Canada Revenue Agency calculator provided on its website and assumes that: • TFSA contributions are investing in diversified portfolios with a return consisting of 40% interest, 30% dividends and 30% capital gains. • No personal income tax is levied on the investment income or gains accruing in the TFSA. • Lump-sum TFSA contributions are made at the start of the year, annual contributions are made mid-year, and monthly contributions are made at the beginning of each month. • An annual income of $40,000 to $79,999 was used as a basis for estimating the federal income tax rate applicable to the investment income accruing in the taxable account. Your actual tax rate may be different depending on the amount and type of deductions you claim. • The provincial income tax rate applicable to investment income accruing in the taxable account is equal to half of the federal income tax rate." |
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