The tax free savings account (TFSA) was introduced in 2009 as a vehicle for Canadians to save and grow their money in a tax free way.
In the 10 years since the introduction of the TFSA, many investors do not take advantage of the benefits of this account, or only partially contribute to it.
I believe it is a great time to review some of the benefits of the TFSA:
- If you are currently investing and being taxed on capital gains, dividends and interest, you can shelter some this income by contributing to a TFSA
- Over time, the difference between tax free compound growth and growth outside of TFSA can be significant. Please see the comparison on page 2 of this article
- A TFSA provides flexibility to withdraw the funds without tax consequences, as your contributions are made with “after-tax dollars”
- You can take advantage of tax splitting by gifting amounts to your lower income spouse or adult children to contribute to their own TFSA
- You can name a spouse as a successor holder, or another beneficiary of your TFSA in order to avoid probate upon your passing
A couple of important points to understand with Tax Free Savings Accounts:
- The contribution limit for 2019 is $6,000
- If you have not contributed before, your cumulative total carried forward to this year is $63,500
- You can contribute the annual amount (or cumulative amount), regardless of your income level
Please contact me to discuss the role this account can play in your wealth plan.