A Tax-Free Savings Account (TFSA) is a great tool for saving, whether you’re saving for a rainy day, home repairs, or retirement. Because you can withdraw the money tax-free whenever you need it, TFSAs are also a good choice for an emergency savings fund.
If you do withdraw money from your TFSA, you won’t lose yearly contribution room because the withdrawn amount will be added to your contribution limit for the following year, or any year after that. As well, any unused contribution room gets carried over to the following year.
Talk to your account manager about how to best take advantage of this great, versatile saving product.
The TFSA is available to Canadians 18 years of age or older.
Investment income earned in the account is not taxed.
Much like an RRSP, a range of investment vehicles, including savings accounts, guaranteed investment certificates and mutual funds can be held in a TFSA.
Up to $5,000 can be contributed for each year between 2009 and 2012. The contribution limit for 2013 is $5,500.
Unused contribution room can be carried forward indefinitely.
While contributions are not tax-deductible, tax-free withdrawals can be made anytime.
Any withdrawals from the plan add to future contribution room, letting you “replace” whatever you take out the following year.
Learn more about Tax-Free Savings Accounts.
Excerpt from asterisk February 2012 print version.