Having a Tax Free Savings Accounts (TFSA) account is an excellent way to save and invest your money while protecting it from taxation. However, there are a number of rules pertaining to TFSA’s that everyone should about if you are looking to maximize the benefits you can get.
- Inherent to TFSA’s is the obvious benefit that any capital gains made on investments are tax free. Accordingly, any investment losses incurred within a TFSA are NOT tax deductible.
- Interest costs on funds borrowed to invest in a TFSA are not tax deductible either
- The Government of Canada imposes an annual limit regarding how much an individual can contribute to his/her TFSA; exceeding this limit will result in a penalty fee equal to 1% for each month there are overcontribution funds in the account. Currently, this limit is $5,500 per year.
- Management fees paid by a TFSA holders are not tax deductible
- When a withdrawal is made from a TFSA, that amount is added to contribution year for the following calendar year
- You must be 18 years old to start contributing to a TFSA and there is no age limit to contributing to a TFSA
- TFSA’s are not just savings accounts; they can be structured to hold several investment vehicles including GIC’s, bonds, stocks, ETF’s and many more
- Investment earnings and withdrawals from a TFSA do not affect any government assistance or benefits you may receive. This allows low income individuals to earn tax free returns without it affecting their eligibility for social support
- If you did not contribute in the past or did not meet maximum contribution limits, you can catch up on unused contribution room. You can contribute upto $31,000 to in unused contribution.
- You cannot claim a dividend tax credit for dividend paying stocks which are held within a TFSA
The above presents a high level summary of the rules and guidelines regarding investing in a TFSA. In order to truly understand how you can use a TFSA to maximum your returns and earning potential, book an appointment with a financial advisor at GTA Wealth Management Inc. Our financial advisors and tax accountants will tailor a financial and tax plan perfectly tailored to your exacting financial requirements and goals, maximizing your wealth potential.
Join the many happy clients of GTA Wealth management Inc. Contact or call GTA Wealth Management toll free at 1 855 GTA WLTH (855 482 9584) to accelerate your ride to financial independence. A professional wealth management financial advisor is ready to serve your wealth management, tax return and planning needs. GTA Wealth Management Inc. has three convenient locations in Mississauga, Toronto and Markham to serve you.
Go back
