Saving for a family vacation? Looking to supplement your child's education fund or your own retirement savings?
A tax-free savings account (TFSA) may provide the flexibility you need to put money away for the future – without taking a stinging bite out of your savings today.
Canadians have been able to contribute to TFSAs since January 2009 and, according to the Canada Revenue Agency (CRA), more than 4.8 million Canadians have opened one. In the first year alone, they deposited more than $18 billion. Here's how TFSAs work.
What is a TFSA?
Tax-free savings accounts are available to anyone over the age of 18.
You're allowed $5,000 in contribution room per year, and that carries over from one year to the next.
So, if you only put in $2,000 in 2010, you can deposit up to $8,000 in 2011. And if you haven't opened an account yet, you'll actually start with $15,000 in contribution room ($5,000 each for 2009, 2010 and 2011).
Seniors and lower-income earners may find they can really benefit from this account. The money you deposit and the interest you earn is not considered income, and therefore any federal benefits (such as Old Age Security or the Canada Child Tax Benefit) you receive are not affected, says Cleo Hamel, a senior tax analyst with H&R Block in Calgary.
Page 1 of 2 – Learn why TFSAs are unique on page 2.
