What you need to know about TFSAs
Eligibility
To open a Tax Free Savings Account (TFSA), individuals must meet the following requirements:
- be at least 18 years of age,
- have a social insurance number: and
- reside in Canada
You can have more than one TFSA account, but the maximum allowable contribution amount applies to the total of all TFSA accounts held.
Note: The age of majority is 19 for residents of Newfoundland and Labrador, New Brunswick, Nova Scotia, British Columbia, Northwest Territories, Yukon and Nunavut, which may delay the opening of a TFSA. However, the accumulation of contribution room will start at age 18.
Contributions
The 2009 contribution limit is $5,000. This annual limit will be indexed to inflation and rounded to the nearest $500 on a yearly basis. Contributions can be made anytime during the year and you do not have to contribute the maximum every year. Any unused contribution room is carried forward indefinitely which means that there is no limit on how much contribution room you can accumulate. And, you are not required to have earned income to accumulate contribution room.
The CRA will determine TFSA contribution room (based on information provided by issuers) for each eligible individual who files an annual T1 individual tax return. This amount will be reported on your Notice of Assessment.
Note: Contributions are not tax-deductible
Withdrawals
You can withdraw funds from your Tax-Free Savings account at any time, for any purpose, without being taxed. Your withdrawal amount will be added to unused contribution room starting the following year. Neither income earned within a TFSA nor withdrawals from it affect eligibility for federal income-tested benefits and credits, such as Old Age Security (OAS), the Guaranteed Income Supplement (GIS), Canada Child Tax Benefit or the Goods and Services Tax (GST) credit.
Note: Withdrawals are not included in taxable income
