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The basics on the new ‘tax free savings accounts’

Written on November 30, 2008 at 6:35 pm, by rhonda

Things to know about the new Tax Free Savings

• Starting January 1, 2009, the Tax Free Savings Accounts are available for Canadian residents who are at least 18 years of age.
• You can contribute up to a maximum of $5000 a year. Any unused contribution room gets carried over to the following year.
• Withdrawals from your Tax Free Savings Account will not affect your ability to qualify for Federal income tested benefits like the Child Tax Benefit or the Guaranteed Income Supplement.
• You can open a Tax Free Savings Account and invests in GICs, mutual funds and other investments and not be taxed on any of the growth or earnings.
• You can have more than one Tax-Free Savings Account with different institutions but you cannot exceed your allowable contribution limit.

Tips

• Don’t replace your RRSP for a TFSA just yet. If you are in a high tax bracket contributing to your RRSP may be the preferred route to take. Then use your tax rebate as your annual contribution to your TFSA.
• RESP are still an ideal vehicle to use to save for your children’s education. Like a TFSA, all growth is tax free. Unlike a TFSA, the RESP comes with the Canadian Educational Savings Grant of at least 20% but the grant and all the growth within the RESP is taxed upon withdrawal.
  
  For More Information, check out the Government’s Tax-Free Savings Account information page.

Rhonda Sherwood, CFP, FMA
Wealth Advisor
http://www.rhondasherwood.com
http://www.itsHERmoney.com