Tax-Free Savings Account
Building Wealth Tax-Free
The Tax-Free Savings Account allows Canadian residents, 18 years of age and older, to save after-tax income and pay no further taxes on those funds or their investment returns. In addition to the annual $5,500 maximum, unused contributions from prior years can be carried over and past withdrawals can be re-contributed in the following year. Annual contribution limits were $5,000 for 2009-2012, $5,500 for 2013-2014 and $10,000 for 2015.
Unlike an RRSP, there is no upfront tax deduction with a TFSA, but neither are the proceeds taxed when they are withdrawn. This means interest compounds tax-free, as do capital gains and dividends generated by mutual funds and stocks. Plus, any withdrawal you make frees up a comparable amount of new contribution room the following year – the TFSA offers full flexibility to withdraw and re-contribute.
How Do I Know It’s Right for Me?
The TFSA is attractive for any person saving for any goal, from automobiles to vacations to home renovations. And just as RRSP withdrawals have become a key tool for first-time home buyers, the TFSA offers a unique advantage for people entering the housing market – a TFSA withdrawal doesn’t have to be repaid.
It will also be attractive to low-income seniors, since tax-free TFSA withdrawals will not be added to income and will not trigger reductions in Old Age Security benefits or the Guaranteed Income Supplement. There is no maximum age limit for contributing to a TFSA and unused contribution room can be carried forward indefinitely.
As with RRSPs, TFSA holders can name spouses as beneficiaries and roll the proceeds over to them upon their death. And, as with spousal RRSPs, spouses can contribute to their partner’s TFSA. This means couples can shelter up to $10,000 worth of new investments every year from tax. High-income investors who may have maxed out their RRSP room can use the TFSA for additional shelter, and to receive dividends from foreign investments, which do not qualify for the dividend tax credit – there is no foreign content limit on a TFSA.
TFSA Investment Options
Term Investments (GICs) give you the security of government-guaranteed deposit insurance1 and a competitive rate of interest, with available terms from 90 days to five years.
Earn a high rate of interest on your savings without tying your money up for a lengthy term. With our Investment Savings Account, there’s no minimum amount, no minimum monthly balance, and you can withdraw money anytime with no withdrawal penalty.
Get the potential for a higher return with mutual funds. Credential® Asset Management Inc.2 offers a select group of the most popular funds from Canada’s leading mutual fund providers, plus the award-winning Ethical Funds family of socially responsible funds.
If you’re a Member who wants to take control of creating and protecting your personal wealth, you can work with an expert at FirstOntario who understands the intricacies of investing and growing your money. Through our CredentialSecurities®2 Investment Advisors, we can offer you full-service investing with knowledgeable advice tailored to your unique circumstances.
1. Deposits are insured by the Deposit Insurance Corporation of Ontario. Insurance is limited to $100,000 per individual for unregistered investments, whereas it is unlimited for TFSAs and other registered plans.
2. Mutual funds are offered through Credential Asset Management Inc. and mutual funds and other securities are offered through Credential Securities Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Unless otherwise stated, cash balances, mutual funds and other securities are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer that insures deposits in credit unions. Mutual funds and other securities are not guaranteed, their values change frequently and past performance may not be repeated. Credential Securities Inc. is a Member of the Canadian Investor Protection Fund.