In many ways a TFSA is better than an RRSP
The Canadian government’s Tax Free Savings Account, introduced in 2009, is a widely available tax-free savings vehicle that families should seriously consider. The greatest benefit is the ability to add money (up to your limit) and take out money with no tax deductions.
Canadian residents can deposit up to $5000 per year that the account has been open. That means that after three years that account can hold up to $15 000 without taxes being charged. That also means that if you are unable to deposit up to your limit you can roll-over that amount into the next year’s total.
How this affects Canadian Families
- This money is not considered income so it will not effect your eligibility for Employment Insurance, Old Age Security or Guanteed Income Supplement
- You will not have to collapse your TFSA into a RIF at a certain age – keeping the money in your account tax-free
- Unlike an RRSP this is a tax exemption and not a differal
- You are able to “gift” money to your spouse with no penalties. If you reach your personal limit you can help top up your spouses TFSA
There really is no downside to filling your Canadian Tax Free Savings account.
For more information:
- Canada Revenue Agency
- BDO: Answering your TFSA Questions(downloadable .pdf)
- Canadian Business Online: TFSA is a Hit With Seniors, According to BMO Survey
