The Tax-Free Savings Account (TFSA) program began in 2009. It allows the individuals who are 18 and above with a valid social insurance number to save money and see the savings grow tax free. Canadians aged 18 and older can save up to $5,500 every year (as well as any unused contribution room from previous years) in a tax-free savings account.
Your contributions to a TFSA will not be deductible for income tax purposes. Investment income, including capital gains you earn in a TFSA, will not be taxed, even when withdrawn. You can carry forward unused TFSA contribution room to future years. Subject to your investment terms, you can withdraw funds from the TFSA at any time for any purpose. The amount you withdraw is added to your contribution room in the next year, in addition to your annual maximum.
Income earned in a TFSA or withdrawals will not affect one’s eligibility for federal income-tested benefits and credits. TFSA assets can be transferred directly to your spouse when you die without affecting his/her contribution room. A beneficiary can be named on almost all TFSA accounts, thereby helping avoid the cost and delays associated with probate and estate settlement. TFSA should be considered if: You want to save money for an emergency fund (or any other purpose) and see your savings grow without paying taxes on the investment income. You’re looking for enhancing your retirement savings. You want to save taxes on your investment earnings in savings account.
Contributions All TFSA contributions made during the year, including the replacement or re-contribution of withdrawals made from a TFSA, will count against your contribution room. At any time in the year, if you contribute more than your allowable TFSA contribution room, you will be considered to be over-contributing to your TFSA and you will be subject to a tax. The annual TFSA dollar limit for the years 2009, 2010, 2011 and 2012 was $5,000. The annual TFSA dollar limit for the years 2013 and 2014 was $5,500. The annual TFSA dollar limit for 2015 is $10,000. The annual TFSA dollar limit for 2016 is $5,500. At Behl Financial, we can make your comprehensive plan and can advise you the best possible strategy to invest in TFSA or any other investment tools.