TFSA Questions
TFSA Frequently Asked Questions
- What is a TFSA (Tax Free Savings Account)?
- What are the benefits of a TFSA?
- How much can you contribute annually to a TFSA?
- How do you determine your annual contribution limit each year?
- Can you deduct contributions to a TFSA for tax purposes?
- Who is eligible to open a TFSA?
- What is the age limit when a TFSA must be closed?
- Can you deduct interest on money borrowed to invest in your TFSA?
- How does a TFSA compare to an RRSP?
Q: What is a TFSA (Tax-Free Savings Account)?
A: A TFSA or Tax Free Savigs Account is a registered savings plan created by the federal government in 2008 beginning in the 2009 taxation year, that allows you to invest in the plan and earn investment income tax-free within that plan. More info…
Q: What are the benefits of a TFSA?
A: The primary benefits are:
- Investment income earned within a TFSA accumulates tax-free.
- Any unused contribution not used in any year can be carried forward indefinitely.
- You may withdraw any amount any time. The withdrawals are notincluded in taxable income.
- Whatever amount you withdraw is added back to your contribution limit for the next taxation year.
Q: How much can you contribute annually to a TFSA?
A: For each taxation year, you can contribute any amount up to your contribution limit for that year. Your contribution limit would be composed of three amounts:
- Starting in 2009, you would be allowed to contribute up to $5,000 (in each subsequent year, the annual limit will be indexed to inflation and rounded to the nearest $500).
- Any withdrawals from previous years is be added to the contribution limit for the year.
- Any unused contributions from previous years is be added to the contribution limit for the year.
Q: How do you determine your contribution limit each year?
A: You will be notified by Canada Revenue Agency each year on your Notice of Assessment, which you receive after you file your tax return.
Q: Can you deduct contributions to a TFSA for tax purposes?
A: No.
Q: Who is eligible to open a TFSA?
A: Canadian residents aged 18 or older are eligible to open a TFSA. A TFSA can only be held by a single, personal individual, who must make all contributions to the plan and control the assets. TFSAs cannot be held jointly, by trusts or corporations.
Q: What is the age limit when a TFSA must be closed?
A: There is none.
Q: Can you deduct interest on money borrowed to invest in your TFSA?
A: No.
Q: What are the main differences between a TFSA and an RRSP?
A: Please refer to our TFSA/RRSP chart.
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