Tax-Free Savings Account
TFSA: Tax-Free Savings Account
A Tax-Free Savings Account (TFSA) is a type of registered plan with tax advantages. Unlike other types of savings, you’re not taxed on the income you earn. It’s a great way to save for your short or long-term goals; because it lets your savings grow – tax-free. We also offer you the ability to open a US$ component of a TFSA plan which will allow you to hold U.S. securities and settle trades in U.S. dollars.
What are the benefits of TFSAs?
1. Tax-free growth
You don’t pay taxes on the investment income or growth earned in your TFSA - helping you build your savings faster.
See how much you could save with the TFSA Savings Calculator
2. Contribute up to $5,5001 a year
You can contribute up to $5,500 annually to your TFSA and any unused contribution room is carried forward.
See the rules for contributing to your TFSA
3. Tax-free withdrawals
Unlike a Retirement Savings Plan, you don’t pay withholding tax on withdrawals.
See the rules for making withdrawals from your TFSA
4. You can put back any amounts you withdraw2
What is it good for?
People just starting out
In your early adult saving years, a TFSA fits naturally as an all-purpose savings vehicle. Whatever your savings goals – a house, a car, a home renovation, travel or rainy day savings – the tax-free growth provided by a TFSA can help you reach them faster. Any Canadian resident over 18 can use a TFSA to save. The benefit is you have a longer time horizon to let your savings grow – that’s why it can help you reach your goal faster.
Saving for the future
In your prime working years, when your main focus is on accumulating wealth, a TFSA can be an excellent way to complement your investment strategy.
Pre-Retirement
The pre-retirement years are a time when you have probably made almost all your major purchases and now want to make sure you have everything in place to have the kind of retirement you’ve dreamed of.
Enjoying Retirement
In your retirement years, a TFSA provides you with the ability to shelter your non-registered investments from tax. There is no upper age limit on a TFSA, you can continue contributing to it and getting the benefits of tax-free growth throughout your retirement.
Expand Forms and Documents
Please read through these important forms and documents below.
1 Annual TFSA contribution limit for 2016. Annual TFSA contribution limit was $5,000 from 2009 to 2013, $5,500 from 2013 to 2014 and $10,000 in 2015. Contribution limits are subject to revision by the federal government.
2 The amount you withdraw can be re-contributed to your TFSA the following year or years without impacting your contribution room.
Where to put your savings?
Whether your savings goal is for a comfortable retirement, homeownership or education, both RSPs and TFSAs can be a good option. To learn more take a look at the comparison chart below:
The difference between TFSAs and RSPs
| TFSA | RSP | |
|---|---|---|
| Primary purpose | Saving for any purpose | Retirement savings, home purchase or education |
|
Annual contribution limit |
$5,5001 PLUS amounts withdrawn in previous years2 |
18% of previous year’s earned income (maximum limits apply), less pension adjustments |
| Contributions |
Not tax-deductible |
Tax-deductible |
|
Unused contribution room |
Carried forward | Carried forward |
| Growth |
Tax-free |
Tax-deferred |
| Withdrawals |
You’re not taxed on withdrawals. |
Money taken out is taxed as income at your marginal rate. Withdrawals are counted as income and may affect federal income-tested government benefits such as Old Age Security |
| Withdrawn amounts |
Added to contribution room in future years |
Contribution room is lost for amounts you withdraw |
| Plan maturity |
None; no upper age limit on contributions |
End of year when you turn 71 |
| Spousal plan |
Not permitted Money can be gifted with no attribution rules |
Permitted You can contribute directly to a spousal RSP |
| Eligible investments |
You can hold savings accounts, GICs, mutual funds, stocks, bonds |
You can hold savings accounts, GICs, mutual funds, stocks, bonds |
| Age minimum | 183 | N/A |
1 Annual TFSA contribution limit for 2016. Annual TFSA contribution limit was $5,000 from 2009 to 2013, $5,500 from 2013 to 2014 and $10,000 in 2015. Contribution limits are subject to revision by the federal government.
2 The amount you withdraw can be re-contributed to your TFSA the following year or years without impacting
your contribution room.
3 The holder of a TFSA with TD must be of the age of majority in their province of residence.