What You need to know about TFSA
We all have unique needs depending on our situation. TFSA is one of the registered account that you can take advantage of as a part of your investment portfolio with following benefits:
Tax Free Growth: Investors do not pay tax on the investment income including interest income, dividends or capital gains.
Tax Free Withdrawals: Investors do not pay tax on TFSA withdrawals including interest income, dividends or capital gains.
Earned Income Not Required: Since TFSA deposits are paid with after-tax dollars, earned income is not required to enjoy the benefits of a TFSA.
You are eligible to open TFSA account if you are:
18 years of age or older with a Social Insurance Number &
Haven’t reached maximum contribution limit &
Resident of Canada.
It means that the TFSA dollar limit is not prorated in the year an individual:
Turns 18 years old; or
Becomes a resident or a non-resident of Canada.
However, be careful that contributions made to a TFSA are not tax-deductible and it has annual limit. The annual TFSA dollar limit for the years:
2009, 2010, 2011 and 2012 was $5,000.
2013 and 2014 was $5,500.
2015 was $10,000.
2016 was $5,500.
2017 is $5,500.
Any contributions above yearly limit would be subject to tax penalties unless you have carried over contribution room from previous years.
The maximum amount that you can contribute to your TFSA is limited by your TFSA contribution room. All TFSA contributions made during the year, including the replacement or re-contribution of withdrawals made from a TFSA, will count against your contribution room.
At any time in the year, if you contribute more than your allowable TFSA contribution room, you will be considered to be over-contributing to your TFSA and you will be subject to a tax equal to 1% of the highest excess TFSA amount in the month, for each month that the excess amount remains in your account.
Any contributions that are made or withdrawn from a TFSA in the prior year may not be reflected in your available current year contribution room until after the end of February. All issuers have until the last day of February to electronically submit a TFSA record to the CRA for each individual who has a TFSA. Any transactions made in the current year will not be included.
What if I can’t make the maximum allowed contribution?
Unused contribution room is carried to the following year. You do not lose the opportunity to take advantage of the unique benefits of a TFSA if you can’t contribute the maximum amount within the year.
What can I invest in?
TFSAs invest in various types of mutual funds. Based on your personal risk tolerance and investment objectives, we can offer you various investment solutions from some of the industry’s leading product providers.
Can I have more than one TFSA account?
You may have multiple TFSA accounts, as long as your annual contributions are under your contribution limit. Additional deposits may be subject to tax penalties.
Contact us for more information and learn how to open a TFSA account.
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