Take advantage of new tax-free savings accounts
Beginning next year, Canadian investors will be able to deposit $5,000 each year into a new tax-free savings account (TFSA).
How it works. Deposits into your account are not tax-deductible. However, any interest or investment earnings, including capital gains, are not subject to tax. As well, you can withdraw money at any time, for any purpose, without facing tax. Any amounts withdrawn can be put back at a later date, without reducing future deposit room.
Many ways to use. You can use your account to save for shorter-term goals, such as buying a car, renovating your house, or building an emergency fund. A tax-free account can also help you achieve more tax-efficient savings after you’ve filled your RRSP contribution room.
You can also contribute to your spouse’s or common-law partner’s tax-free savings account. And if you’re over 71 and have collapsed your RRSP, this account provides a new opportunity for tax-free savings growth.
This useful new savings tool is something that all investors should consider incorporating into their 2009 financial plans. If you’d like more information, we’re here to help.