"The hardest thing in the world to understand is the income tax."

Albert Einstein

A Huge Tax Break for Canadians

Author: Brad Howland
First Posted: Oct. 25, 2008

In 2009 the new Tax-Free Investment Savings Account will come into force in Canada, and what a great tax break it is! Here's the scoop from the Department of Finance.

  • Starting in 2009, Canadian residents age 18 or older will be eligible to contribute up to $5,000 annually to a TFSA, with unused room being carried forward.
  • Contributions will not be deductible.
  • Capital gains and other investment income earned in a TFSA will not be taxed.
  • Withdrawals will be tax-free.
  • Neither income earned within a TFSA nor withdrawals from it will affect eligibility for federal income-tested benefits and credits.
  • Withdrawals will create contribution room for future savings.
  • Contributions to a spouse's or common-law partner's TFSA will be allowed, and TFSA assets will be transferable to the TFSA of a spouse or common-law partner upon death.
  • Qualified investments include all arm's-length RRSP qualified investments.
  • The $5,000 annual contribution limit will be indexed to inflation in $500 increments.

ING Direct Promotion

The Canadian banks will start trumpeting these accounts soon. ING Direct already has a flashy site up at www.hugthetaxman.ca. It's quite fun to surf through, learn about TFSAs, and sign up for an account that will pay in essence 6% interest on $5,000 until the end of 2008.

Disclaimer

This information is provided without warranty of any kind. All readers wishing to take advantage of the information offered here should consult a qualified income tax preparer. In no event will Brad Howland, Howland Tax Services, or this website be liable for any damages, including lost profits, arising out of the information offered on this website.