Recently I have noticed a trend that many Canadian and especially new Canadians are not taking the advantage of owning a Tax Free Saving Account.
With this in mind I have decided to write about a TFSA .
Who Can Open a Tax Free Savings Account?
Any individual who is 18 years of age or older and who has a valid social insurance number is eligible to open a TFSA.
What is a Tax Free Savings Account?
A Tax Free Savings Account is a special account where an individual is able to save money over their lifetime without any tax implications.
The Tax Free savings account started in 2009. The government of Canada created the account to encourage Canadians to save money and no matter what the growth of that account no interest will ever be paid.
This account started in 2009. The limit from 2009 to 2012 is $5000.00
From 2013 – 2014 it increased to $5500.
Then in 2015 the government increased it to $10,000.
The amount was decreased by the new governmentin2016 back to $5500.00
If an individual has not made any contributions and was 18 years or older in 2009 they may make the contributions from 2009 to 2016. You do not lose the contribution if it was not done in the prior years.
The money contributed to a Tax Free Savings account is NOT tax deductible. The contributed amount cannot be deducted from your taxable income.
Any amount contributed or any investment income made is non-taxable.
You may have more than one TFSA but the amount between the account may not exceed your annual contributions.
Depending on the type of investment held in your TFSA, you can generally withdraw any amount from the TFSA at any time. Withdrawing any amount from the TFSA does not reduce the total amount of contributions you have already made for the year.
If you decided to replace, or re-contribute all or a portion of your withdrawals into your TFSA in the same year, you can only do this if you have available TFSA contribution room. If you re-contribute but do not have contribution room you will have over-contributed to your TFSA in the year. You will be subject to a tax equal of l% of the highest excess TFSA amount in the month, for each month that the excess amount remains in your account. Before doing a re-contribution talk with your financial institution about your re-contribution.
After following all the rules a TFSA is a wonderful savings vehicle to assist you in meeting your future financial goals.