What is Tax-Free Savings Account?
Advantages of TFSA?
- Simple and accessible
You can contribute up to $5,500 annually in a tax-free account, regardless of your income.
- Tax free
Any earnings generated (interest, capital gains or dividends) in the TFSA, as well as sums withdrawn, are not taxable.
- Cumulative contribution room
Unused annual contribution room accumulates indefinitely.
- Ease of withdrawals
You can withdraw any amount at any time without penalty. *There is no restriction as to the use of withdrawals.
- Ideal complement to an RRSP
The TFSA investment instrument complements an RRSP as an efficient way to save and put more money toward your retirement.
- No effect on income-based government benefits
Neither TFSA contributions nor its earnings affect eligibility for the Guaranteed Income Supplement, Old Age Security, the Canada Child Tax Benefit or other government benefits based on income.
- Wide range of investments
You have the freedom to choose the funds – daily interest, guaranteed interest and a wide range of segregated funds – that reflect your needs.
- Practical income-splitting tool
A couple can contribute to two TFSAs even if one of them has no income.
- Collateral assignment
It’s possible to assign the assets of a TFSA as collateral for a loan.