Tax Free Savings Account (TFSA)

What is it?

To encourage Canadians to save over their lifetimes, in January of 2009 the Canadian government introduced this registered account.

Using their after-tax dollars, Canadians 18 or over (in provinces where the Age of Majority is 18) can contribute up to $5,000 per year into a registered savings account, and will not be taxed on the earnings.

Contribution room is created:

• an allocation of $5,000 per year;
• unused allocation from the previous year
• any withdrawals made in the previous year

The TFSA is not "just a savings account" in the usual sense of the word. Many investment options are eligible. Choose from these great Wainwright Credit Union options:

TFSA Daily Interest Account

• Minimum Investment: $500 or $100 with a minimum $50/mo allotment
• Term: Redeemable

3-Year TFSA Investment Account

• Minimum Investment: $1,000
• Term: Three year non-redeemable

5-Year TFSA Investment Account

• Minimum Investment: $1,000
• Term: Five year non-redeemable

How does the TFSA work?

• contributions to a TFSA will not be deductible for income tax purposes but investment income, including capital gains, interest, and dividends earned in a TFSA will not be taxed, even when withdrawn;
• unused TFSA contribution room can be carried forward to future years;
• depending your your choice of TFSA product, you can withdraw funds from the TFSA at any time for any purpose, and the amount you withdraw creates the same amount of extra contribution room for the following year;
• neither income earned in a TFSA nor withdrawals will affect your eligibility for federal income-tested benefits and credits (e.g. child tax benefit, GST credit);
• neither income earned in a TFSA nor withdrawals will reduce other benefits that are based on your income level (e.g. Old Age Security, EI benefits);
• contributions to a spouse’s TFSA will be allowed and the contributing spouse will not be subject to income attribution rules;
• TFSA assets can be transferred to a spouse upon death.

Quick Tips:

• no upper age limit
• no limit to how big the contribution room can grow (e.g. your initial deposit of $5,000 grows to $7,500.) You withdraw $2,500. Next year, you can contribute another $5,000 PLUS the $2,500 you withdrew.
• indexed annually to inflation, with contribution room rounded up to the nearest $500
• no limit to number of TFSA’s you hold (but total annual contribution room does not change)
• can be transferred to surviving spouse’s TFSA tax-free

Talk to us about how Wainwright Credit Union can help you take advantage of the Tax Free Savings Account to help you meet your goals and enhance your financial situation. Check out our Locations page for contact information and check out our current TFSA rates.