Tax Free Savings Accounts

Take a SmartStep and keep all that you Earn

In 2009, the new Tax Free Savings Account (TFSA) arrived in Canada. The TFSA offers an exciting and versatile savings opportunity for all Comtech Fire members. Unlike an RRSP, which is intended primarily for retirement savings, the TFSA has the flexibility to help you meet a wide variety of financial goals – from saving for a new house, to planning a dream vacation. Open a TSFA today and get savings benefits that will last a lifetime.

How does a TFSA work?

Set up

  • To open a TFSA, you must be a Canadian resident, aged 18 or older, and have a Social Insurance Number (SIN)

Contributions

  • You can contribute up to $5,500 per year
  • There is no age limit to contributions – you can contribute all your life
  • Any unused contribution room can be carried forward indefinitely

Taxation

  • All investment income earned in a TFSA is tax-free, including interest, dividends and capital gains
  • If you currently keep your money in a high-interest deposit investment, you might earn 3 per cent a year. Ontario has a top tax bracket of about 46% per cent, so a high income earner would give the government almost half of their 3 per cent investment income if the money was held outside a Tax Free Savings Account. With a Tax Free Savings Account you keep all of your investment income!
  • In the event of a death the TFSA can be transferred tax-free to a spouse or common – law partner
  • Contributions to a TFSA are NOT tax-deductible

Withdrawals

  • Money can be withdrawn, tax-free – at any time, for any purpose
  • When you make a withdrawal, an equivalent amount of contribution room will be added to your account the following year (e.g. withdraw $2,000 in one year and you can contribute up to $7,500 in the next)
  • If you’re age 71 or older, you’re required to draw down on your Registered Retirement Income Fund (RRIF). If you have ongoing savings needs, you can now invest up to $5,500 of your RRIF income annually in a Tax Free Savings Account. The investment income earned in the Tax Free Savings Account will not affect your Guaranteed Income Supplement. Currently, income earned on non-registered investments is used to calculate eligibility for federal income-tested benefits and credits. The income earned, or the funds withdrawn from your Tax Free Savings Account will not affect your eligibility for federal income-tested benefits and credits, such as Old Age Security Benefits, Canada Child Tax Benefit, or Employment Insurance.

Additional Benefits

  • Unlike an RRSP, the Tax Free Savings Account can be used as security to obtain a preferred rate of interest on a loan or line of credit.
  • Comtech Fire’s Tax Free Savings Accounts, provided they are invested in savings accounts or term deposits, are fully insured by the Deposit Insurance Corporation of Ontario.
 

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