Investing

Tax-Free Savings Account

Now you have a flexible new option to help you save money: the Tax-Free Savings Account (TFSA). This new registered savings account lets Canadians take advantage of tax-free savings.

With a TFSA, you can –

• Pay no tax on investment income and growth you earn in the account
• Withdraw your money any time¹ and pay no tax on withdrawals
• Contribute up to $5,000² a year

A TFSA is a great way for you to save for your short- or long-term goals. Whether you’re putting money aside for a down payment on a house, saving for a major purchase like a car or a vacation, building your rainy day fund or making sure you have enough for a comfortable retirement, a TFSA can help.

Start benefiting from tax-free savings today! Find out how you can get started with a TFSA or learn more about your TFSA choices.

The benefits of a TFSA

There are three main advantages to a TFSA:

1. Tax-free growth
2. Tax-free withdrawals
3. Put back any money³ you withdraw

1. Tax-free growth

You pay no tax on the investment income or growth generated in your TFSA. This tax-free growth can help you build your savings faster.

Because capital gains and other investment income earned in a TFSA are not taxed, a person contributing $5,000 a year to a TFSA for 20 years could enjoy additional savings of $18,506 compared to saving in an unregistered account.

Combined federal and provincial tax savings are based on a $5,000 annual contribution for 20 years and a 5 per cent rate of return for a middle-income earning account holder. For unregistered savings, a 21 per cent average tax rate on investment income is assumed (based on 40 per cent interest, 30 per cent dividends and 30 per cent capital gains).
Chart is for illustrative purposes only.⁴

2. Tax-free withdrawals

You can make withdrawals when you want¹ your money and not pay any tax. That makes the TFSA suitable for both short- and long-term savings, and also gives you flexible access to your money if an unexpected need arises.

3. The ability to put back any amounts you withdraw

You can re-contribute amounts³ that you withdraw beginning in the year after you withdraw them. In addition, your unused contribution room is carried forward indefinitely. You can contribute any or all of your accumulated contribution room whenever you want.

Reach your financial goals faster. Visit any TD Canada Trust branch, Download an application and return it by mail or call 1-866-222-3456 and open a TFSA today.

¹ Some restrictions may apply, depending on the investments chosen.
² 2009 contribution limit. This limit is indexed to inflation annually.
³ The amount you withdraw can be re-contributed to your TFSA the following year without impacting your contribution room.
⁴ The illustration is based on the Canada Revenue Agency calculator provided on its website and assumes that:
– TFSA contributions are invested in diversified portfolios with a return consisting of 40% interest, 30% dividends and 30% capital gains
– No personal income tax is levied on the investment income or gains accruing in the TFSA
– Lump-sum TFSA contributions are made at the start of the year
– An annual income of $40,000 to $79,999 is used as a basis for estimating the federal income tax rate applicable to the investment income accruing in the taxable account. Your actual tax rate may be different depending on the amount and type of deductions you claim
– The provincial income tax rate applicable to investment income accruing in the taxable account is equal to half of the federal income tax rate