Tax Free Savings
This investment plan is for you if:
- you're looking for a flexible plan for saving money.
- you want to save money for retirement—tax-free.
- you're in a career with a great pension so dipping
into your retirement savings isn't a big deal.
Key Features & Benefits
Give your savings some flexibility. The Tax-Free Savings Account (TFSA)* allows you to set money aside in eligible investment vehicles to earn valuable savings tax-free. We offer a variety of investment options, including: term deposits and our Investment Savings Account—100% guaranteed**.
Some important facts about the Tax-Free Savings Account:
- Withdraw funds at any time and for any reason without incurring tax
- Income earned and capital gains under a TFSA will be tax-sheltered
- Unused contribution room may be carried forward and contributed in a future year
- Withdrawals (capital and income) will create contribution room for future savings
- Contributions will not be tax deductible
- Qualified investments include: term deposits, high-interest savings accounts, investment shares, index-linked term deposits, mutual funds, segregated funds, and publicly traded securities and bonds
Interested in finding out more? Check out our online brochure (PDF) chalked full of great information. You will need Adobe Acrobat Reader to view this PDF document. If you do not already have Adobe Acrobat Reader, click here to download this free software.
Click here to visit the Government of Canada's TFSA information page online for the most up-to-date information.
Frequently Asked Questions
What is a Tax Free Savings Account (TFSA)?
The Tax Free Savings Account was introduced by the Federal Government in its 2008 budget. Investment income earned in the account is sheltered from income tax.
Who can hold a TFSA?
All Canadian residents who are 18 years of age or older (19 years of age to open a TFSA as a resident of British Columbia with Credential Asset Management / Credential Securities) and who hold a Social Insurance Number are eligible to hold a TFSA. You are not permitted to open a TFSA if you are non-resident.
What happens if I become non-resident?
The TFSA continues to exist and income earned remains tax-free. You are not permitted to contribute to the TFSA while you are non-resident.
How much can I contribute to a TFSA?
You can contribute a maximum of $5,000 for each year from 2009-2012, a maximum of $5,500 for each year from 2013-2014 and a maximum of $10,000 for each year from 2015. Under proposed legislation, starting January 1, 2016, the annual TFSA dollar limit for 2016 will decrease from $10,000 to $5,500.00. Moving forward the TFSA annual room limit will be indexed to inflation and rounded to the nearest $500.Check with the CRA for the exact amount you can contribute at : www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/cntrbtn-eng.html
Can I open more than one TFSA?
Yes, but the total amount you can contribute to all of your TFSAs cannot exceed your maximum contribution room for that year plus any contribution room that has been carried-forward from prior years.
Can I contribute to my spouse's or common-law partner's TFSA?
No. You can give your spouse or common-law partner the money to deposit, but only the account holder can contribute to the account. This is recorded as your spouse's or common-law partner's contribution and does not affect your contribution limit.
Can parents open a TFSA on behalf of a child?
No. TFSAs are available only to individuals (not Trusts or Corporations) who are resident in Canada and are 18 years of age or older (19 years of age to open a TFSA as a resident of British Columbia with Credential Asset Management / Credential Securities).
Do I lose my annual contribution room if I don't make a deposit?
No. The annual contribution will carry forward to the following years.
What types of investment can I hold in a TFSA?
Any type of investment that would be eligible for an RRSP is eligible for a TFSA. This would include: savings accounts, term deposits or GICs, mutual funds, stocks and bonds.
What happens if I contribute more than my contribution limit to a TFSA?
The Canada Revenue Agency (CRA) will assess a penalty of 1% per month on the amount in excess of your contribution limit.
Who keeps track of my contributions to a TFSA?
CRA will determine your contribution room based on information regarding your deposits and withdrawals reported to them by the financial institution that holds your TFSA. Check with the CRA for the exact amount you can contribute at : www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/cntrbtn-eng.html
Do I get a tax credit for my contribution to a TFSA?
No. Because the income earned is tax-sheltered, you cannot claim a tax credit for your contribution to a TFSA.
What happens if I withdraw money from my TFSA?
Unlike a withdrawal from an RRSP, no tax is withheld on a withdrawal from a TFSA.
Am I limited to the number of withdrawals I can make from a TFSA each year?
No. You can withdraw money at any time for any reason.
Does a withdrawal impact the amount I can contribute later?
If you contributed $5,500 to a TFSA and subsequently withdrew $2,500 that year, the amount you could contribute to the TFSA beginning in the next year would be the annual contribution limit amount plus $2,500 for the withdrawl. It is important to note that amounts withdrawn cannot be re-deposited until the following year.
Do I have to have a certain level of income to contribute to a TFSA?
No. There is no income requirement. All eligible Canadians receive the same amount of contribution room regardless of income levels. Unlike an RRSP, the TFSA does not have an "earned income" requirement.
Will the income I earn in my TFSA impact my eligibility for Old Age Security or any other benefit that references my level of income?
No. There is no impact on program eligibility or on the age credit.
How does a TFSA differ from an RRSP?
Generally, an RRSP is thought of as more of a retirement planning vehicle. The TFSA is a savings product designed for the short-term and long-term goals of every day life.
- Contributions to a TFSA do not generate a tax credit.
- Tax is not withheld on withdrawals from a TFSA.
- "Earned Income" is not required in order to contribute to a TFSA.
- A TFSA never has to be converted to a different product, for example, like an RRSP has to be converted to a RRIF by the end of the year in which you turn 71 years of age.
- Attribution rules do not apply to TFSAs. You can give your spouse or common-law partner money to deposit to a TFSA and the income earned on it remains tax free.
Can I open a joint TFSA?
No. Like an RRSP, the TFSA can only be held by an individual.
What happens to my TFSA when I die?
You can elect to transfer your TFSA to your spouse or common-law partner without any impact on his or her contribution room. You may also elect for the TFSA to transfer to other beneficiaries. Your TFSA will not be subject to taxation until the end of the calendar year following your death. Tax will be payable on income earned after the date of death.
What happens to my TFSA if there is a breakdown in my marriage or common-law partnership?
In this situation, the assets in a TFSA may be transferred between the individuals involved. The contribution room of the person transferring the assets is not increased by the amount of the transfer nor is the contribution room of the person receiving the assets reduced by the amount transferred.
Can I use my TFSA as security for a loan?
Unlike an RRSP, a TFSA can be pledged as collateral for a loan. However the legislation permitting this is not yet law.
Can I borrow money to contribute to my TFSA?
Yes Island Savings offers loans on this product. You will not be permitted to deduct the interest you pay on the loan on your tax return.
What You'll Need
Opening a TFSA is simple! You're eligible if:
- you're a resident in Canada, and
- you’re 18 years of age or older (19 years of age to open a TFSA as a resident of British Columbia with Credential Asset Management / Credential Securities), and
- you hold a valid Social Insurance Number (SIN).
There is no maximum age limit to open or hold a TFSA and you may hold more than one TFSA.
Ready to invest? Creating an investment plan with Island Savings Insurance Services is easy!
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**The Credit Union Deposit Insurance Corporation of British Columbia, a statutory corporation, fully guarantees all deposits. Credit Union equity shares and investments such as mutual funds or RSP equity plans are not covered by deposit insurance.