Tax-Free Savings Account (TFSA)

TFSA

Save with the TFSA!


Canadians need to save for many different purposes over their lifetimes. Reducing taxes on savings can help.

That is why the Government introduced the Tax-Free Savings Account (TFSA). It is the single most important personal savings vehicle since the introduction of the Registered Retirement Savings Plan (RRSP).

The TFSA allows Canadians to set money aside in eligible investment vehicles and watch those savings grow tax-free throughout their lifetimes. TFSA savings can be used for any purpose, such as to purchase a new car, renovate a house, start a small business or take a family vacation.

Canadians from all income levels and all walks of life can benefit.


How the TFSA Works Expand/Collapse

  • As of January 1, 2013, Canadian residents, age 18 and older, can contribute up to $5,500 annually to a TFSA. This is an increase from the annual contribution limit of $5,000 for 2009 through 2012 and reflects indexation to inflation.
  • Your contributions to a TFSA are not deductible for income tax purposes but the investment income, including capital gains, earned in your TFSA is not taxed, even when withdrawn.
  • Your unused TFSA contribution room is carried forward and accumulates for future years.
  • You can withdraw funds available in your TFSA at any time for any purpose — and the full amount of withdrawals can be put back into your TFSA in future years. Re-contributing in the same year may result in an over-contribution amount which would be subject to a penalty tax.
  • Neither income earned in a TFSA nor withdrawals affect your eligibility for federal income-tested benefits and credits.
  • You can provide funds to your spouse or common-law partner to invest in their TFSA.
  • TFSA assets can generally be transferred to a spouse or common-law partner upon death.

How is a TFSA Different From a Registered Retirement Savings Plan? Expand/Collapse

Both an RRSP and TFSA offer tax advantages by allowing you to accumulate investment income tax-free within the plan or the account, but they have key differences.
  • Contributions to an RRSP are deductible and reduce your income for tax purposes. In contrast, your TFSA savings contributions are not deductible.
  • Withdrawals from an RRSP are added to your income and taxed at current rates. Your TFSA withdrawals and growth within your account are not included in your income—they are tax-free.
All income levels and walks of life can benefit from a TFSA, but only careful review of your financial situation will determine how to optimize the use of TFSAs, RRSPs and non-registered investments; that’s where Plainsview Credit Union fits in. Our staff will guide you through investment options to make investment choices that fit you.
 

Investment Account Calculators