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Tax Free Savings Accounts - The Basics

July 26th 2016

Tax Free Savings Accounts (TFSA’s) have been around since 2009 and provide Canadians with a great way to save money each year with the interest earned being tax free.  In recent years, there have been a few changes to the contribution amounts and the limits have increased over the years. People have all different reasons for opening a TFSA, it could be used for emergencies, in addition to RRSP’s or just as your primary savings account option. Whichever you choose, there are many benefits to using your Tax Free Savings Account. Below are a few basic things to know about TFSA’s and how they work.

1)      Contribution room starts accumulating from 2009 onwards or the year you turn 18.

2)      Contribution limits have changed since it originally started, fluctuating between $5,000 - $10,000 per year.

3)      Any income that you earn from your TFSA is tax free.

4)      Contributions made are not tax deductible.

5)      You can have more than one TFSA account at multiple credit unions, brokerages or banks.

6)      The total of all your TFSA accounts cannot go over the limit (determined in point 1) otherwise you will be charged an over-contribution fee by the government.

7)      Any unused contribution room will accumulate each year and carried forward indefinitely.

8)      Any withdraws made from your TFSA, will result in an equal credit to your contribution room the following year.

9)      Contributions can only be made by you, the holder of the account.

10)    In order to open a TFSA your surname, SIN and birthdate must match what CRA has on record.

 

Opening a Tax Free Savings account can be done at your local credit union or bank, by a financial advisor or at a Brokerage such as Qtrade.

Written by Amanda Perkins