Hamilton Tax-Free Savings Account (TFSA) Basics
During the 2008 federal budget, the government announced the introduction of the TFSA.
"It's new and sounds technical, but TFSAs are actually very simple and powerful savings tools that should help Canadians break out of their anemic saving patterns, which currently stands at less than one per cent of household annual incomes," said Linda Knight, President and Chief Operating Officer, BMO Mutual Funds. "Basically, a TFSA will act like a piggy bank where Canadians can save for a rainy day without being taxed on the investment growth."
Despite being described by industry watchers as the single most important personal savings vehicle since the introduction of the RSP, a recent research report conducted by Harris/Decima found four in ten Canadians had "absolutely no awareness" of the TFSA.
The following is a primer on how the TFSA will be applied when launched in January 2009:
- Any Canadian 18 and older can contribute up to $5,000 a year in a TFSA
- Contributions into an TFSA are not tax deductible, but similar to an RRSP, investors do not have to pay tax on any investment growth
- Any unused contribution room can be moved forward to subsequent years
- Similar to RRSPs, TFSAs can include a variety of investment products such as mutual funds and GICs
- News Canada