Mortgage Articles

Tax Free Savings Account

Canadians can now put up to $5,000 per year into a Tax Free Savings Account (TFSA) to save for almost anything from a dream vacation to retirement. Many people may prefer to use their TFSA to prepare for retirement because there are no tax consequences on withdrawls and they can save “room” for their RRSP contributions. The full amount of withdrawals can be re-contributed to a TFSA to ensure there is no loss in a person’s total savings room. Since most people have savings accounts at different times and for different needs in their life, this option is especially appealing.

The TFSA also provides more savings options and greater savings incentives to seniors and those with low to moderate incomes.

Scenario: Robert saves $4,000 a year for 10 years in a TFSA and earns investment income on those savings. He decides to start a business and withdraws his TFSA, which by that time has accumulated to $50,000, with no tax consequences. After 10 years, Robert, decides to sell his business. With the proceeds from the sale, Robert decides to re-contribute to his TFSA the $50,000 he withdrew from it 10 years ago. He may do so without reducing his other available contribution room.

When the TFSA launched on January 1, 2009, it became even easier for Canadians to save and plan for their future. Our Alberta Mortgage brokers will be able to assist you with your future planning in this area. If you used the savings inside your TFSA as a down payment when purchasing your first home, you could reach your goal that much sooner. If you already own a home and are planning on refinancing to pay off your debts, why not take out some extra money to top up your RRSPs and get a head start on your TFSA? Talk to one of our Alberta Mortgage brokers today for more information about the TFSA.

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