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Saving just got a whole lot easier!
The Tax-Free Savings Account (TFSA) program began in 2009. It is a way for individuals who are 18 and older and who have a valid social insurance number to set money aside tax-free throughout their lifetime. Contributions to a TFSA are not deductible for income tax purposes. Any amount contributed as well as any income earned in the account (for example, investment income and capital gains) is generally tax-free, even when it is withdrawn.
You can have more than one TFSA at any given time, but the total amount you contribute to all your TFSAs cannot be more than your available TFSA contribution room for that year.
One of the biggest benefits of having a TFSA is that your pension is not affected by TFSA. Your federal income-tested benefits and credits such as: old age security (OAS) benefits, the guaranteed income supplement (GIS), or employment insurance (EI) benefits will not be reduced as a result of the income you earn in your TFSA or the amount you withdraw from your TFSA.
The income earned in the account or amounts withdrawn from a TFSA will also not affect your eligibility for federal credits, such as the Canada child benefit (CCB), the working income tax benefit (WITB), the goods and services tax/harmonized sales tax credit (GST/HST), or the age amount.
You can withdraw money from the TFSA at any time, for any reason, with no tax consequences, and without affecting your eligibility for federal income-testedbenefits and credits.
Your TFSA contribution room is the maximum amount that you can contribute to your TFSA.
Starting in 2009, TFSA contribution room accumulates every year, if at any time in the calendar year you are 18 years of age or older and a resident of Canada.
You will accumulate TFSA contribution room for each year even if you do not file an income tax and benefit return or open a TFSA.
So, if you were 18 years or older and had a valid Social Insurance Number on or before 2009, but you didn’t contribute and money to TFSA, you would have $69,500 in contribution room as on January 1, 2020.
