Tax Free Savings Account

1) What is it?
The Tax Free Savings Account or TFSA is a registered savings account that allows you to earn investment income, tax-free inside the account. Contributions to the account are not deductible for tax purposes, and withdrawals of contributions and earnings from the account are not taxable.

2) Am I eligible?
If you are an individual who is resident in Canada and 18+ years of age.

3) When will this be available?
January 2009

4) How much can I contribute to the TFSA per year?
Each year you could contribute an amount up to your contribution room for the year. Your contribution room would be made up of three amounts:

• Each year you would be allocated and allowed to contribute at least $5,000 (this annual amount will be indexed to inflation and rounded to the nearest $500 on a yearly basis).
• Any withdrawals made in the previous year would be added to the contribution room for the year.
• Any unused contribution room from the previous year would be added to the contribution room for the year.

5) Are there any restrictions on withdrawals?
No.

6) Would contributions and withdrawals have any impact on my taxes?
No, contributions to a TFSA would not be deductible in computing income for tax purposes, and no amount earned in or withdrawn from a TFSA would be included in computing income for tax purposes.

7) What kind of investments could I hold in my TFSA?
A TFSA would generally be permitted to hold the same investments as a registered retirement savings plan. This would include mutual funds, publicly traded securities, GICs, bonds, and certain shares of small business corporations.

8) How is a TFSA different from an RRSP?

• Withdrawals from a TFSA are tax-free and do not result in lost contribution room.
• Contributions to a TFSA are not tax deductible.
• With a TFSA you don’t need earned income to accumulate contribution room.
• There is no requirement to convert the TFSA to an income payment option (i.e. RRIF) at any age.
• You can give money to your spouse to open a TFSA without being subject to the Canada Revenue Agency’s (CRA) attribution rules.

Contact us today to find out more about the Tax Free Savings Account and find out how you can increase your returns.