TFSA: Tax Free Savings Accounts

My dad just tipped me off to this great opportunity to save your money AND avoid the tax man on your gains!

I think I probably already heard about TFSAs before, but it was only when my dad pointed them out again to me that I did some digging to find out what they are about.

The biggest question in my mind was how they were different from RRSPs.  Here is the skinny on that:

  • The money you put into a TFSA is not deductible from your income at tax time.
  • You can take the money out whenever you want, with no tax implications.
  • When you take money out, you have to wait until the following year to put it back in.
  • There are some limits to the kind of investment vehicles you can hold in a TFSA, but what they are is not clear yet.
  • The amount you can contribute is not dependent on your income, rather you get $5,000 per year which accumulates with a % extra added for inflation.
  • They start in 2009, but you can start the application process now.

Right now it really sounds like a can’t lose proposition, and a great way to promote savings.  Let me know if you head about any gotchas!  You can sign up for one at most Canadian banks.

For more information, you can go to this Government of Canada website.


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