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Understanding TFSAs

Tax-Free Savings Accounts (TFSAs) have been quite successful since their inception in 2009. However, people aren't always fully aware of how they work, so here are some facts:

  • Who can contribute to a TFSA? Anyone over the age of 18.
  • How much can I contribute? Up to $5,000 per year from 2009 to 2012, $5,500 for 2013 and 2014, $ 10 000 for 2015 and $5,500 for 2016.
  • Are my contributions tax deductible? No.
  • Is TFSA income taxable? No.
  • Are my withdrawals taxable? No.

To find out more, go to Comparing TFSAs and RRSPs.

TFSAs are perfect for:

  • saving up for important projects (trips, renovations)
  • covering unexpected expenses (emergency funds)
  • getting tax-free investment income

Be careful. If you withdraw from and contribute to your TFSA in 2016, make sure that your total 2016 contributions do not exceed the allowed limit, as you cannot redeposit the withdrawn amounts in your TFSA until 2017.

Important: A 1% monthly tax applies to all contributions exceeding the eligible amount.

Use the federal government's TFSA calculator to find out about your potential tax savings.

Tools and tips

Essential questions about TFSAs

16 questions about TFSAs.

Read tip - Essential questions about TFSAs

Should you invest your savings in an RRSP or in a TFSA?

This depends on what you want to do with your money.

Read tip - Comparing TFSAs and RRSPs

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