Tax Free Savings Account

What is a Tax Free Savings Account?

TFSAs began as an investment vehicle in 2009 for Canadians. You can save money and earn interest income, dividends, or capital gains "tax-free." Currently, Canadian residents 18 years of age or older are allowed to invest up to $5500 without being taxed on the growth and there are no restrictions on how you can use the money. TFSAs are available at the Summerland Credit Union or Summerland Financial Services.

Unlike RRSPs, contributions to your TFSA are not deductible for income tax purposes; however, withdrawals of TFSA funds and earnings are not taxable. So you can withdraw at any time and these funds are not subject to withholding tax, nor are they reported as taxable income. 

Who can open a TFSA?

Any individual (other than a trust) who is a resident of Canada, is 18 or older and holds a valid Social Insurance Number.

How much can you contribute each year?

You are allowed to contribute $5500 each year. If you don't contribute to your TFSA in a year, the unused amount is added to next year's contribution room and is carried forward indefinitely.

What are your investment options?

We offer TFSA savings accounts at a higher interest rate than our regular savings accounts and one year to five year non-redeemable term deposits. Summerland Financial Services offers managed solutions that can earn you interest, dividends, or capital gains - all tax free.

Are there any restrictions on withdrawals?

No, you can withdraw any amount at any time, and these withdrawals are not subject to withholding tax, nor are they reported as taxable income. Withdrawals from a TFSA increase the contribution room for future years and do not affect your Old Age Security benefits, the Guaranteed Income Sumpplement, GST credit or Child Tax Credit.

Other points you should know:

  • You are responsible for ensuring that your contribution room has not been exceeded and that any excess contributions will be subject to a 1% tax per month for each month the excess remains in the plan.

Drop by the Summerland Credit Union or Summerland Financial Services for more information. You can also visit the Government of Canada website.

 

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