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Tax-Free Savings Account (TFSA)

This plan permits the account-holder to save money outside of the RRSP plan without incurring any tax on interest or capital gains earned on these funds. A corporate Chartered Accountant should be consulted for specific situations, but the following is a summary of the major highlights of this plan:

  • This is a registered plan that you must arrange with a financial institution

  • This plan is valuable for those who have fully contributed to RRSP up to the maximum permitted amount, and have additional funds that are not planned for expenditure in the near future

  • Contributions to TFSA are not tax-deductible

  • Interest and capital gains earned within the TFSA are not taxable

  • No restrictions as to when withdrawals can be made

  • Annual contribution is limited to $5,000 per individual

  • Unused contribution room can be carried forward to future years indefinitely

  • Any withdrawals from the plan are added to the contribution room for the following year

  • Contributions exceeding the maximum allowable amount will be taxed at 1% per month, similar to RRSP excess contributions

  • Qualified types of investments within the TFSA are generally the same as for RRSP

  • Interest on money borrowed to make a contribution is not tax-deductible

  • TFSA can be used as collateral for a loan

  • No contributions are allowed while you are a non-resident

Please contact us at 905-943-4046 if you need further assistance or accounting services in the coming months. Click here for additional contact information

Tax-Free Savings Account (TFSA) - Simkover and Associates Chartered Accountants

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