Accounts

A: The Tax-Free Savings Account (TFSA) is a registered account that lets Canadians earn money tax-free. Through a TFSA, you can put your savings into eligible investments and not pay tax on the investment income you earn.

A: The idea behind TFSAs is to make the benefits of tax-free savings available to as many Canadians as possible. For that reason, TFSAs are available to every Canadian resident who is 18 years of age or older and has a Social Insurance Number (SIN).

However, at TD, you must have achieved age of majority in order to open a TFSA. So, if you live in British Columbia, Newfoundland and Labrador, Nova Scotia or New Brunswick, then you can’t actually open a TFSA until you are 19, which is the age of majority in those provinces. However, you will accumulate contribution room from the time you are 18.

A: An RSP is designed specifically to provide you with income after you retire. Your contribution limit is based on your income and the contributions you make are tax-deductible, but you do pay tax on the money when you receive it as income.

A TFSA is not designed specifically for retirement, but to help you save money for a wide range of goals. The amount you can contribute is not based on your income and your contributions are not tax-deductible. You can withdraw your money any time you want it, and you don’t pay tax on those withdrawals. You also don’t lose contribution room when you make a withdrawal – you can recontribute that amount to your TFSA the following year or any year after that.

A: The TFSA contribution limit for 2016 is $5,500¹. You can also carry forward any unused contribution room from previous years. The annual contribution limit was $5,000 from 2009 to 2012, $5,500 from 2013 to 2014 and $10,000 for 2015.

¹Annual TFSA contribution limit is subject to change by the federal government.

A: You can carry forward any uncontributed amounts into future years indefinitely.

So for 2016, you can contribute up to $5,500 (annual contribution limit for 2016¹) PLUS any unused contribution room from previous years (The annual contribution limit was $5,000 from 2009 to 2012, $5,500 from 2013 to 2014 and $10,000 for 2015.).

¹Annual TFSA contribution limit is subject to change by the federal government.

A: Every year, the government will calculate how much TFSA contribution room you have available. You will be informed of your contribution limit when you receive your T1 Notice of Assessment.

A: If you contribute more than your contribution limit, you will pay a penalty of 1% per month on the excess amount.

A: No, you can’t contribute directly to your spouse’s TFSA as you can with a spousal RSP. However, you can give your spouse money, which they can then contribute to their own TFSA. Any income your spouse earns on the money in their TFSA is theirs and will not be attributed back to you.

A: You can withdraw funds from your TFSA any time you want¹ – you don’t have to reach a certain age before you withdraw your money.

¹Some restrictions may apply, depending on the investments chosen.

A: No, you don’t have to pay tax on the amounts you withdraw.

Because TFSA withdrawals don’t count as taxable income, they don’t affect Federal income-tested benefits or tax credits you may receive, including the Canada Child Tax Benefit, the Working Income Tax Benefit, the Goods and Services Tax Credit and the Age Credit. TFSA withdrawals also won’t reduce benefits based on your income level, such as Old Age Security, the Guaranteed Income Supplement and Employment Insurance benefits.

A: Anything you want. You could wait until you retire and use it to supplement retirement income you have from pensions, RSPs or other sources, but you can also use it for short-term savings goals like a new car or a vacation, or for needs that arise suddenly like repairs to your home.

A: No, you never lose your contribution room – in fact, you can recontribute amounts you have withdrawn. You have to wait until the next year to recontribute, but you can carry forward the recontribution room indefinitely.

¹ Annual contribution limit for 2016 is $5,500. Annual contribution limit from 2009 to 2012 was $5,000. Annual contribution limit from 2013 to 2014 was $5,500. Annual contribution limit for 2015 was $10,000. Annual TFSA contribution limit is subject to change by the federal government. Excess contributions to a TFSA will be subject to a penalty tax of 1% per month based on the highest excess TFSA amount in that month. The penalty will be calculated on a monthly basis until the excess amount is withdrawn.

A: No, you don’t pay any tax on the investment income you earn in the account, and you don’t pay income tax on the amounts you withdraw.

A: No, you can’t deduct contributions to your TFSA from your income as you can with your RSP contributions.

A: You can hold many of the same investments you hold in your RSP in your TFSA, including mutual funds, GICs, stocks and bonds.