thedufferinrealestatemarketCanadians have been asking for it for years and finally, beginning 2009 we’ll have a new tax assisted savings vehicle; The Tax-Free Savings Account (TFSA).
What Is a TFSA?
The new TFSA is an easy way for investors to put away cash tax-free. It will allow you to invest money without paying tax on the income it earns.
How does a TFSA work?
The mechanics of the TFSA are relatively simple. All Canadian residents, 18 and older, will be permitted to contribute up to $5,000 annually. The contribution amount, which is not tax deductible, will be indexed annually to inflation. If an individual does not contribute in a year or contributes less than the maximum amount, he or she can use that contribution room in any subsequent year.
What is the difference between a TFSA and an RRSP?
Like RRSP’s, income through a TFSA is earned free of tax. However, unlike RRSP’s, that income is not taxed on withdrawal. Withdrawals can be made at any time and be used for any purpose, with out attracting one penny of tax. And what’s more, any funds withdrawn from the TFSA (income and capital) are added to an individual’s contribution room and can effectively be re-contributed in any subsequent year. This means that the TFSA can be used time and time again to save for various expenditures over a lifetime.
Here are just a few different types of investor profiles that illustrate how the TFSA can be used to your advantage…
The Tax-Free Savings Account – Now a Reality!
Posted by thedufferinrealestatemarket on December 5, 2008
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