Tax Free Savings Account (TFSA)

Tax-Free Money for What Matters to You!

Canadians have a new way to save with the Tax Free Savings Account (TFSA). Introduced by the Government of Canada in 2009, the account allows you to save or invest money without paying tax on the interest income. You can make withdrawals tax free.

ECU offers the following investment options for your TFSA:

High Interest Savings Account:

To truly start saving, consider setting up regularly scheduled automatic transfers from another account.
Withdrawals can be made at anytime.

Guaranteed Investment Certificate (GIC):

You can invest in a GIC for a term of 1 to 5 years. Withdrawals can be made only at time of maturity.

You can open a TFSA plan in person, or by correspondence.
* The balance of your TFSA will appear on your online banking, but you will have to contact the credit union to make deposits, and provide a signature to make withdrawals.

Click on the following topics to learn more:

How the TFSA Works

  • Any Canadian, 18 years or older, can contribute to a TFSA
  • Contribution room for TFSAs:
    From 2009 - 2012 = $5,000
    From 2013 - 2014 = $5,500
    2015 = $10,000 per year
    2016 = $5,500 
    2017 = 5,500
  • Interest earned in a TFSA is NOT reported on your T5 - Statement of Investment Income.
  • Contributions are NOT tax deductable.
  • Contributions must be made by the owner. Funds can be withdrawn at any time for any purpose.  Withdrawals of contributions and/or interest income are not taxable.
  • Withdrawals of contributions and/or interest income will increase the unused contribution room in the following calendar year. Re-contribution in the same year may result in an over-contribution amount, which is subject to a penalty tax.

  • Unused contribution room can be carried forward. If you don’t contribute the maximum amount in a given year, you can carry forward your unused contribution room indefinitely. For example, if you contribute $3,000 to your TFSA in 2009, your contribution room for 2010 will be $7,000 ($2,000 carried forward from 2009 plus $5,000 for 2010).
  • Neither interest earned nor withdrawals will affect eligibility for federal income-tested benefits/credits (e.g. Guaranteed Income Supplement, Old Age Security, Age Credit).
  • TFSAs are separately insured for their full amount by Depositors Insurance Corporation of Ontario (DICO).

Things to Remember

  • You are allowed to have multiple TFSAs, but it is your responsibility to ensure that your contribution limits are not exceeded. Excess contributions will be taxed and will be subject to a penalty of 1% per month until withdrawn. Unlike RRSPs, there is no penalty-free over contribution room!

  • You may choose to take a loan to invest in your TFSA. The interest on the borrowed funds is not tax deductable. TFSA contracts may be used as security for a loan.
  • A spouse or common-law partner can be appointed as a Successor Account Holder. Upon death of the TFSA account holder, the appointed successor will be the holder of the TFSA, retaining the tax-free status.
  • Alternatively, the value of the deceased TFSA account holder may be transferred to the TFSA of the surviving spouse or common-law partner, regardless of whether or not they have available contribution room. The transfer will not impact their existing contribution room.

A Flexible Account for a Lifetime of Savings

  • Not everyone is able to save each and every year.  Those who cannot contribute $5,000 in a given year are able to carry forward their unused contribution room to future years.
  • In addition, Canadians may want to use their savings—to buy a new car or a cottage, or start a small business—and the full amount of withdrawals can be put back into the TFSA in the future.

How Is a TFSA Different From a Registered Retirement Savings Plan?

  • An RRSP is primarily intended for income during your retirement years. A TFSA is like an RRSP for everything else in your life.
  • Contributions to a TFSA are not tax deductable whereas contributions to an RRSP reduce your income for tax purposes.
  • To contribute to a TFSA you do not need earned income whereas you must earn income in order to contribute to an RRSP.
  • There is no maximum age restriction when holding a TFSA whereas an RRSP must be converted to a RRIF or an annuity by the end of the year in which you turn 71.
  • Unused contribution room in a TFSA is carried forward indefinitely whereas unused contribution room in an RRSP may be carried forward only until age 71.
  • Both growth within a TFSA as well as withdrawals from a TFSA are tax-free whereas withdrawals from an RRSP are added to your taxable income for the year in which funds are withdrawn and are taxed at current rates.

Benefits for Seniors

The TFSA provides seniors with a tax-free savings vehicle to meet ongoing savings needs, something they have only limited access to once they reach age 71 and are required to begin drawing on their registered retirement savings.

No Impact on Income-Tested Benefits

Neither income earned in a TFSA nor withdrawals will affect your eligibility for federal income-tested benefits and credits, such as the Guaranteed Income Supplement and the Canada Child Tax Benefit. This will improve incentives for people with low and modest incomes to save.

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