A Huge Tax Break for Canadians
Author: Brad Howland
First Posted: Oct. 25, 2008
Revised:
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.