Frequently asked questions about TFSAs (FAQ)

A. The TFSA is a registered savings plan regulated by the federal government. Therefore, it is important to comply with the rules, particularly regarding the annual allowed contribution limit. If you withdraw from and contribute to your TFSA in 2011, be careful that your total 2011 contributions do not exceed the allowed limit, as you cannot redeposit the withdrawn amounts in your TFSA until 2012.

A. No. Since TFSA withdrawals are not taxable, they cannot affect your eligibility for federal benefits and credit based on income, such as the Canada Child Tax Benefit (CCTB), the Working Income Tax Benefit (WITB), the Guaranteed Income Supplement (GIS) or the Goods and Services Tax credit.

A. Yes. The selection of investment products in TFSAs is similar to RRSPs. Desjardins offers you a complete range of TFSA investment products, such as: the TFSA savings account, market linked guaranteed investments, fixed rate investments. More information on each investment product is available on the TFSA-eligible investment products section of the Desjardins website.

A. A 1% monthly tax applies to all contributions exceeding the eligible amount, starting on the month you exceed the limit and for each month the contributions remain in the account. This penalty will continue to apply until the first of the following events takes place: you withdraw the entire surplus or the surplus can be absorbed by your contribution limit.

A. Yes. You can use your TFSA to save up for buying a home since TFSA investment income and withdrawals are tax-free. If you're buying your first home, another smart move would be to transfer money from your TFSA to an RRSP when your income is higher. The RRSP contribution will lower your income taxes and you will be able to use money from your RRSP to make a downpayment through the Home Buyers' Plan (HBP). Remember to keep the amount you contributed in your RRSP for 90 days before withdrawing it.

A. Yes. You can transfer some non-registered investment products—such as Desjardins Funds or redeemable term savings—to a TFSA. However, such a transfer could be taxable since it is deemed to have been disposed at the investment's fair market value. For example, if the value of your transferred asset has appreciated, your capital gain will be accounted for at the moment of the transfer. However, any capital loss will be deemed annulled and cannot be used to reduce other taxable gains.

A. No, TFSAs are not included in family patrimony, because they are not part of a retirement plan. Although several people use TFSAs to save for retirement, the account was not designed for that purpose.

A. If your TFSA is transferred to your spouse by a will bequest or otherwise, all savings accumulated in your TFSA will be transferred to your spouse's TFSA without affecting his or her contribution room. These savings will continue to be tax-sheltered.

Until further notice, in Quebec, if your spouse is your heir, the income earned in the TFSA between the date of your death and the moment of the transfer will be paid to your spouse and will be taxable.

Unlike RRSP contribution room, your unused TFSA contribution is forfeited at your death. Your succession will not be able to contribute to your TFSA after your death for your spouse's benefit.

A. Up to date information is available on the CRA (Canada Revenue Agency) website. New forms, policies and guidelines are posted on the site as they become available.