The benefits of Tax-Free Savings Accounts (TFSAs)

January 4, 2016

The benefits of TFSA saving has never been more rewarding.

There are so many things you can save for by using a TFSA. It might be to renovate your home, buy a cottage, go on a dream vacation or save for your child's wedding. It could even be just to have emergency funds readily available. Introduced by the federal government in 2009 to help Canadians save better, the TFSA gives account holders:

  • The opportunity to earn investment income, tax-free – Any interest, capital gains or dividend income you earn within the account is not subject to tax
  • The flexibility to withdraw your savings, tax-free – At any time and for any purpose you choose
  • The ability to contribute to a spouse’s TFSA – Remember, your total contribution to any account cannot exceed the maximum allowed
  • A wide range of investment options for enhanced flexibility – Including mutual funds, guaranteed investment certificates (GICs), stocks, bonds and cash
  • No impact to your government benefits – No income you receive or withdrawals you make from a TFSA will affect your eligibility to receive income-tested benefits such as the Guaranteed Income Supplement, Canada Child Tax Benefit or Old Age Security benefits

By using your TFSA to invest in growth-oriented products such as mutual funds, you have the potential to earn more tax-free investment income over the long term than if you put your money in a savings account or GIC, magnifying the advantages of the plan.

TFSAs: The Basics

Eligibility

  • Anyone 18 years of age and over who is a resident of Canada can open a TFSA
  • A valid Social Insurance Number is required to open an account
  • You do not need to have earned income or file an income tax and/or benefit return

Contributions

  • Unused contribution room can be carried forward to future years
  • Any amount withdrawn from a TFSA can be re-contributed in future years without reducing contribution room
  • Spouses (and common-law partners) can give each other money to contribute to their own TFSA as long as it is within the maximum allowed. TFSA assets can be transferred to a spouse tax-free upon death

Withdrawals

  • No tax will be withheld
  • Funds may be withdrawn for any purpose
  • No limit on the amount of each withdrawal

 Tax features

  • Account is funded with after-tax dollars
  • Earnings growth in plan is tax-sheltered
  • Withdrawals from the account remain tax-free

For more information about how TFSAs can fit into your investment plans, contact your financial advisor or visit AGF.com/TFSA.

The contents of this Web site are provided for informational and educational purposes, and are not intended to provide specific individual advice including, without limitation, investment, financial, legal, accounting or tax. Please consult with your own professional advisor on your particular circumstances.

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