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Account Basics: Everything you need to know about TFSAs

by Invisor Last updated on January 24, 2018 Tags: Save Well, Account Basics

Curious about Tax-Free Savings Accounts (TFSAs) and if they could be the right investment account to help you reach your goals? Check out the information below to learn more about TFSAs and their flexibility in helping you save for various goals. 

What is an TFSA?

A TFSA is a registered, general-purpose savings vehicles that allows Canadian residents aged 18 and older to earn tax-free investment income to more easily meet lifetime savings needs. 

Everything you need to know about:
TFSA contributions 

  • Unlike Registered Retirement Savings Plans, contributions to TFSAs re not tax-deductible
  • Investment income and any capital gains earned inside the account are tax-free, even when withdrawn
  • For 2018, the annual TFSA dollar limit  is $5,500
  • Any unused contribution room from the year of your 18th birthday or 2009 - whichever is later - is carried forward. As of 2018, the total amount of TFSA contribution room available is $57,500

Everything you need to know about: 
TFSA withdrawals 

  • You can withdraw any amount, at any time, tax-free
  • The amount you take out of the account can be re-contributed in future tax years without reducing your normally available TFSA contribution room for that year. Re-contributing in the same year may result in an over-contribution amount, which would be subject to a tax penalty

Be aware of these TFSA penalties

  • Over-contribution is subject to a 1% tax per month
  • Non-qualified investments are taxable. All securities we use at Invisor are eligible for your TFSA.

Things you may not know about TFSAs 

  • You can have more than one TFSA account, although the maximum contribution limit applies across all accounts
  • You can transfer funds between TFSAs held with one provider to another with no tax consequence
  • Funds can be given to a spouse or a common law partner for them to invest in their TFSA
  • TFSA assets can be transferable upon death to your spouse or common law partner
  • To find your TFSA contribution limit, log in to My Account or MyCRA on the CRA website

Most importantly, remember that a TFSA is only a type of account. The investments you hold in your TFSA should depend on your goals, time horizon to get to your goals, and your risk preferences. Speak to an investment advisor if you need help with managing your savings in a TFSA. 

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