A tax-smart way to save for your family’s future

With the Tax-Free Savings Account (TFSA), you can contribute up to $5,500 annually ($5,000 for the years 2009 to 2012) and earn tax-free investment income.

Who can open a TFSA?

Any Canadian resident 18 years or older with a Social Insurance Number.

The age of majority is 19 for residents of Newfoundland and Labrador, New Brunswick, Nova Scotia and British Columbia which may delay the opening of a TFSA. However, the accumulation of contribution room will start at age 18.

What are the benefits?

• Tax-free investment income, including interest, dividends and capital gains
• Annual contributions of $5,500 – indexed to inflation ($5,000 for the years 2009 to 2012)
• Any unused contribution room can be used in future years
• No upper age restriction on contributions unlike an Registered Retirement Savings Plan (RRSP)
• Make withdrawals any time for any purpose (e.g. car purchases, vacations, home renovations)
• Previous year’s withdrawals are added back to your unused contribution room
• Income earned and withdrawals have no impact on federal income-tested benefits or credits (Guaranteed Income Supplement, Child Tax Benefit, Old Age Security, etc.)
• Canadians can contribute to their spouse’s or common-law partner’s TFSA subject to available contribution room

What are the considerations?

• Unlike an RRSP, contributions are not tax deductible
• Capital losses within the TFSA cannot be used to offset taxable capital gains outside the TFSA
• Interest on funds borrowed to fund the TFSA is not tax deductible
• Penalty tax on excess contributions

What investments are qualified for the TFSA?

Cash, mutual funds, guaranteed investment certificates (GICs), publicly traded securities, and government and corporate bonds.