The Tax Free Savings Account (TFSA)

How it works

February 23, 2017

In the 2008 budget, the government of Canada introduced a brand new personal savings vehicle, the Tax-Free Savings Account (TFSA), designed to help Canadians save for different purposes throughout their lifetime.

The Ritcey Team, along with many other wealth advisors, consider the TFSA to be the most important new personal savings vehicle for Canadians since the introduction of the RRSP back in 1957.

A TFSA can hold any combination of eligible investments — such as cash, stocks, bonds, GICs and mutual funds — the growth of which will be sheltered from tax.

How it works.

Each year, you can contribute an amount up to your contribution limit for the year. Your contribution limit is determined as follows:

  • Each year you will be able to contribute up to $5,500 to your TFSA.
  • Any withdrawals made in the previous year will be added to your contribution limit for the current year.
  • Unused contribution room from previous years is added to your contribution room for the current year.
  • The federal government will be responsible for reporting your TFSA contribution limits. These limits can be found on your Notice of Assessment from the Canada Revenue Agency.

Benefits to you.

A TFSA allows you to set money aside in eligible investments and watch those savings grow tax-free throughout your lifetime. Your TFSA savings can be withdrawn from your account at any time, for any reason, and all withdrawals are tax-free.

Capital gains and other investment income earned in a TFSA will not be taxed.

Contribution deadline.

While there is no deadline for contributions to a TFSA, there are several important nuances to the investment – changing contribution limits, the status of TFSA assets as security for a loan, to take just two examples – you should consider.

For further information on the development of a sound TFSA strategy, contact Dave Ritcey, Portfolio Manager of The Ritcey Team, at 902-678-0048.