Tax Free Savings Account

In Quebec, since 2009, anyone over eighteen years of age can open a Tax Free Savings Account (TFSA) (majority age varies for the rest of Canada).

The funds of the account are invested and the profit gained is tax free, as are those on withdrawal from the account.  Withdrawal use is unrestricted and does not influence candidate eligibility for federal governmental programs. The amounts taken out can be recontributed indefinitely in time and the additional earnings from the investment similarly accumulate.

The plan is registered with the Canadian Revenue Agency and allows one to contribute up to $5 000 per year. In twenty-five years, those figures could have nearly quadrupled. Non-contributed funds can accumulate over the years. Great way to save for a car, a vacation or additional education.

The account can coexist with other plans such as the Registered Retirement Savings Plan (RRSP), and investments can be stocks, bonds, GICs and cash. Contributions to RRSP are tax deductible and unused portions also carry on indefinitely. Unlike the TFSA, the RRSP is tax-free interest while the funds are in the account but if one cashes them out then they become taxable.

RRSPs can also be spousal or grouped. In the former, the spouse with the highest income contributes in the other’s stead.

In the latter, the arrangement is made between an employer and employees. All the profits made inside this account are tax free in addition to contribution room carried forward indeterminately. If one has money to invest, it is better for many reasons, including the possibility of fraud. Just like is counter-advised to activate a credit card over a wireless phone; investment accounts are safer than regular ones.

In those cases, an investment representative would manage the account in the group’s sake.

By ElBa

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