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You have a flexible option to help you save money: the Tax-Free Savings Account (TFSA). This registered savings account lets Canadians take advantage of tax-free savings.
With a TFSA, you can –
- Pay no tax on the investment income and growth you earn in the account
- Withdraw your money any time and pay no tax on withdrawals
- Contribute up to $5,000 a year
A TFSA is a great way for you to save for your short- or long-term goals. Whether you’re putting money aside for a down payment on a house, opening a business or making sure you have enough for a comfortable retirement, a TFSA can help.
The Benefits of a TFSA
There are four main benefits to a TFSA:
1. Tax-free growth
You pay no tax on the investment income or growth generated in your TFSA. This tax-free growth can help you build your savings faster.
2. Tax-free withdrawals
You can make withdrawals when you want1 your money and not pay any tax. That makes the TFSA suitable for both short- or long-term savings, and also gives you flexible access to your money if an unexpected need arises.
3. The ability to put back any amounts you withdraw
You can re-contribute amounts that you withdraw beginning in the year after you withdraw them. In addition, your unused contributions are carried forward indefinitely. You can contribute any or all of your accumulated contribution room whenever you want, at any point in your life.
4. Income splitting
Although you can’t contribute directly to your spouse’s or common-law partner’s TFSA, you can give or loan them money which they can then contribute to their own TFSA. This allows you to effectively split income, and any income your spouse or common-law partner earns in their TFSA would not be attributed back to you.
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