Financial Advice: Tax Free Savings Accounts

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Now that the Registered Retirement Savings Plan season is over, it is important that you stay on the Savings Train for your future.

The Government of Canada implemented the Tax Free Savings Account (TFSA) in 2009 to encourage Canadians to save money for their future. The Government is planning to track your TFSA from your income tax return so it is to your benefit to file your return even if you did not have an income in the previous year. By filing your income tax you will qualify for HST which you can then invest in your TFSA.

Starting in 2009 every Canadian resident 18 years or older can begin saving a maximum of $5,000 a year in a Tax Free Savings Account (TFSA). If you make a withdrawal, the amount you withdraw will be added to your contribution room for the following year and can be re-contributed in future years.

Funds contributed to a TFSA are not tax-deductible and the contribution room can be carried forward indefinitely. Funds earned in the TFSA will be tax-free and you can make tax-free withdrawals from a TFSA at any time.

If you have a TFSA you are allowed to hold the same type of investments you would hold in an RRSP, which would include cash, bonds, mutual funds, GIC’s , and shares or stocks of some corporations.

TFSA is not the same as an RRSP. The contributions made in a TFSA are not tax deductible, and you do not pay tax when you withdraw the funds from the TFSA as is done with an RRSP. You do not have to withdraw a certain amount like an RRSP at the age of 71. The TFSA does not have a beneficiary; therefore it should be listed within your will.

Everyone should have a TFSA account. With it, you are able to save to buy what you want when you want it.