With the news that the Tax Free Savings Account limit may double to $11,000 annually per individual I thought I would highlight a few of the most important - and sometimes forgotten -aspects of a TFSA.
Currently the annual limit is $5,500 per individual over 18, with total contribution room being $36,500 for those who were 18 or over in 2009. With current combined contribution room of $73,000 for a couple, TFSAs have been growing in popularity and importance for clients saving for retirement.
Some key facts from our TFSA reference guide are:
- Wide range of investment options
- Investment income and growth earned is tax free
- Withdrawals are tax free
- Amount of withdrawal in one year can be re-contributed in future years.
- Income earned and withdrawals do not affect eligibility for federal income-tested benefits and credits
- Attribution does not apply where funds are given to a spouse to invest in their TFSA
- Unused contributions may be carried forward
TFSAs represent a significant opportunity for Canadian investors. In addition to reducing taxes on investments there are excellent income splitting opportunities, even more so if there is an increase in the annual limit. TFSAs can help to significantly enhance your wealth if properly implemented as part of your overall plan as well as being an excellent starting point for young investors that do not benefit as much from a tax refund generated by contributing to an RRSP.