Since the government introduced TFSAs in 2009, North Peace Savings members have taken advantage of this savings vehicle that allows you to save money in an account without being taxed on earnings throughout their lifetime. Depending on your tax situation now and in retirement, TFSAs may be a better savings vehicle for you than RRSPs. You can shelter a limited amount of savings in a TFSA and never pay any tax on the interest the money earns. Like RRSPs, TFSAs are intended to help you save money and plan for future expenses. The primary difference is money contributed to a TFSA is in after-tax dollars and as a result is not subject to tax upon withdrawal.

One advantage of having a TFSA is its flexibility. Unlike the RRSP, a TFSA will help you save for any purpose. There are no restrictions on the way the funds can be used and no time contstraints on when you may use the funds. A TFSA will help you to save for a rainy day, start a business, buy a boat, renovate a home, or go on a tropical vacation. You can also withdraw funds at any time without suffering tax penalties.

North Peace Savings offers a variety of TFSA investment options including term deposits and savings accounts. For other investment options please visit North Peace Financial Planning Ltd.

Interest and investment income earned in a TFSA—including capital gains—are not taxed on withdrawal and there are no restrictions on how the money is spent. Funds can be withdrawn without penalty and any amount you withdraw can be put back into the tax-free account without reducing your contribution limit.

The TFSA can provide a huge benefit to you, the following example may help to clarify how.

Say you contribute $5,500 to term deposit within a TFSA, which earns 2% over one year, the growth on this term would be $110. Because the money is invested in a TFSA the entire $110 growth goes to you! Normally, in a non-registered account this growth would be taxable. How taxable? Well, assuming that the entire gain consists of income and you are in a 40% marginal tax bracket, you would owe $44 in taxes and therefore would only be left with $66 in growth.

• You are able to contribute a limited amount annually into your TFSA, with unused contribution room carried forward.
• Click here to view annual limits.
• Contributions are not tax deductible.
• Unused contribution room is carried forward indefinitely.

Over Contributions

• Your annual Notice of Assessment will document and notify you of your allowable contribution room.
• You are responsible for ensuring that your contribution room has not been exceeded.
• Should you over contribute, you will be subject to a 1% tax per month on the over contributed amount until it's withdrawn.

• Canadians aged 18 and older can save up to $5,500 every year in a TFSA.
• Contributions will not be tax deductible
• Capital gains and other investment income will not be taxed
• Withdrawals can be made at any time, tax free
• Neither income earned in an account, nor withdrawals will affect eligibility for federal income tested benefits or credits
• Any amounts withdrawn will be added back to the individual's contribution room for the following year

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