Personal Tax Strategy

There is no such thing as a good tax - Winston Churchill

The TFSA: a gift from Ottawa

Winston Churchill was probably right, and it’s not often you get a free pass when it comes to taxes. But starting on January 1, 2009, Canadians will be able put up to $5,000 annually into a Tax Free Savings Account and never have to pay tax on the money it earns.

Here’s how TFSAs work

Starting in 2009, Canadian residents over the age of 18 can save up to $5,000 annually in a TFSA.

Unlike an RRSP contribution, you won’t get an initial tax deduction. But any investment return (capital gains, interest and dividends) earned in a TFSA is never taxed, not even when they are withdrawn.

More advantages

Withdrawals are tax-free and the money can be used for any purpose you wish – from down payments on a home to vacations to financing your child’s college education.

Unused contribution room can be carried forward to future years. And any amount withdrawn from a TFSA can be re-contributed in a future year without reducing contribution room.

And don’t worry: making a withdrawal from your TFSA won’t affect your eligibility for the federal tax credit or income-tested benefits such as the Canada Child Tax Benefit, Old Age Security (OAS) or the Guaranteed Income Supplement (GIS).

To learn more about investing in a TFSA, talk to your financial advisor. For a comparison with RRSPs please go to www.mackenziefinancial.com/tfsa/.