Personal Tax Strategy

It’s easy to withdraw from and re-contribute to TFSAs

In less than a month, you will be able to start contributing to the new Tax-Free Savings Account (TFSA). Starting on January 2, 2009, Canadians age 18 and older can save up to $5,000 every year in a TFSA. Remember, all investment income (including interest, dividends, and capital gains) earned in a TFSA can grow tax-free, and you can withdraw funds at any time, for any purpose, tax-free.

The tax-free withdrawal is one of the most appealing features of the TFSA. Contrast that with withdrawals from investment accounts where you must first pay tax on capital gains.

Example: Christa needs to withdraw $20,000 to renovate her home. This table compares how much she would need to withdraw from her investment account versus her TFSA, to receive an after-tax amount of $20,000.

	From Investment Account	From TFSA
Total contributions	$14,260	$14,260
Growth (7%)	$5,740	$5,740
Amount withdrawn	$20,000	$20,000
Tax payable¹	$1,332	$0
Net proceeds	$18,668	$20,000

¹Assumes Christa is a resident of Ontario and is taxed at the highest tax rate.

With a TFSA, you can easily access your funds whenever you need to without worrying about tax consequences. And, it doesn’t matter what you use the money for: emergencies, home renovations, vehicle repairs, starting a new business, and so on.

What’s more, the amount you withdraw from your TFSA is not taken into account in determining eligibility for federally sponsored income-tested benefits delivered through the tax system – e.g., Canada Child Tax Benefit (CCTB), the GST Credit and the Age Credit. It also won’t impact other income-sensitive benefits such as Old Age Security (OAS), the Guaranteed Income Supplement or Employment Insurance (EI).

Withdrawals and re-contributions

Another key benefit is that TFSA savings room is never lost – even on withdrawal. If you withdraw $5,000 from your TFSA, you can re-contribute this amount in a future year without requiring additional contribution room.

To learn more about the TFSA, see www.mackenziefinancial.com/tfsa.

Reminder!

If you are 18 or older, you can now apply for a Mackenzie TFSA. Applications are available here. Speak with your financial advisor for information on the application process.

Mutual funds sponsored by Mackenzie Financial Corporation are only qualified for sale in the provinces and territories of Canada.

Commissions, trailing commissions, management fees and expenses may all be associated with mutual fund investments. Please read the prospectus carefully before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.