Like most Canadians you work hard for your money and like most Canadians you want to keep a savings account to accumulate funds over time. Your intentions may be to save for a rainy day, a home renovation, a vacation or even retirement. How can you do so and curb your savings from paying taxes? In 2009, the government of Canada introduced what is called a TFSA, better known as a “Tax Free Savings Account”. A TFSA is a fantastic way for Canadians to save all those hard earned dollars.
Who qualifies and is eligible to open a TFSA account? Any person residing in Canada who is above the age of 18 or older and possesses a valid social insurance number can qualify. Once you turn 18 the government will allow you to deposit up to the full TFSA dollar limit for that calendar year.
At the moment TFSA’s can be opened by contacting your bank, insurance company, credit union or even a trust company.
Having a TFSA will not impact your old age security, guaranteed income supplement, employment insurance benefits, Canada child benefit, the working income tax benefit, the goods and services tax/harmonized sales tax credit or the age amount! If you decide to withdraw any funds from your TFSA account at any time there will be no tax consequences.
Some of the direct benefits of a tax free account are:
• Your earnings on investments are tax sheltered
• Reduces taxes on your investments
• Investment vehicles can include; cash, bonds, GICs, stocks and mutual funds
• Withdraw money at any time for any reason without tax implications
• TFSA’s are another alternative if you’re contributing the full amount to your RRSP’s
• Receiving money from government programs won’t be affected by your TFSA
• Ability to deposit funds into your spouse’s account
We recommend having a detailed conversation with a professional in the field before taking the leap to identify what your future personal goals and objectives may be. Here at Al-Mulla CPAs Professional Corporation we say “Tax requires planning, not just compliance!” We will sure do our very best to match your short or long term goals and we will certainly make every possible effort to save you on every possible tax dollar! Contact us today for your free no obligation tax advice.
