Tax-Free Savings Accounts (TFSA)
Beginning January 1, 2009 anyone 18 years of age or older can take advantage of a new savings vehicle that is entirely tax free.
You have the option of choosing savings accounts, GICs, mutual funds or any other investments you currently hold.
Unlike conventional RRSPs, contributions are not deductible from your taxable income; however, any withdrawals that you make from a TFSA are tax free.
Investors can withdraw funds from a TFSA at any time for any purpose and not be taxed or otherwise penalized.
Investment income (including capital gains) earned in a TFSA is not subject to tax.
You will be allowed a maximum contribution of $5000.00 per year and again any withdrawals that you make can be reinvested the next year.
As well, any unused contribution room can be carried forward indefinitely
If you have a spouse, both of you can have your own TFSA.
Individuals can transfer investments from an existing non-registered account into a TFSA, however be careful about transferring investments at a loss.
For instance, you will not be allowed to claim a capital loss if you transfer shares directly to a TFSA.
Instead, sell the shares for cash and then buy the shares back within the TFSA. By doing it this way, you will be able to claim a capital loss for tax purposes.