A Positive New Year’s Resolution : TFSAs
Have you considered opening a Tax-Free Savings Account (TFSA) as one of your New Year's Resolutions? It may be a good idea since Canadians will likely be paying more in relation to income taxes.
According to an article by The Canadian Press entitled Most Canadians to Pay More Taxes in 2011, this year will "go down as the year they saw their net pay stubs shrink, in some cases by significant amounts".
Derek Fildebrandt, national research director with the Canadian Taxpayers Federation, states "some families in Ontario – where inflation was highest last year – will wind up paying over $1,000 more in taxes in 2011 compared with 2010." Click HERE for details.
Melanie Hall-Szyszkiewicz, division director of Investors Group Financial Services in Kelowna, B.C., wrote an interesting article entitled Year-End Taxes: Investigate 3d Tax-Saving Tactics published in the December 2010 issue of Forever Young News. She notes that TFSAs may be a great way to achieve your financial goals. Reasons to consider contributions to a TFSA are:
- You may deposit or withdraw your money at any time, for any purpose, tax-free.
- With a TFSA, there is no tax deduction for your contributions BUT you do not pay tax on future investment returns or withdrawals. "All TFSA eligible investment earnings are totally tax-free and will not trigger any clawbacks on federal tax credits or benefit programs, such as the Guaranteed Income Supplement, Old Age Security Benefits, Age Credit, GST Tax Credit, or Canada Child Tax Benefit."
- There are no age restrictions and there is no limit on how much "contribution room can be carried forward – fill up unused room any time you want."
- A gift can be made to your spouse for investments in a TFSA and transfer TFSA assets to a spouse upon death.
- The current maximum annual TFSA contibution is $5,000 per person per year.
The additional TFSA contribution room for 2011 will again be $5,000. Melanie Hall-Szyskiewicz states "this means that beginning on January 1, 2011, you will be able to contribute another $5,000 to your TFSA in addition to your 2010 limit."
By contributing up to the maximum limit yearly and by saving any investment gains earned within the account over the years, a tidy nest egg may be the result of prudent tax-free savings.
For more information on Tax-Free Savings Accounts (TFSAs), check out the following titles at the Toronto Public Library:
Pape, Gordon. The Ultimate TFSA Guide: Strategies for Building a Tax-Free Fortune. Toronto : Penguin Canada, 2010. Click HERE to view details about this title.
Pape, Gordon. Tax-Free Savings Accounts: A Guide to TFSAs and How They Can Make You Rich. Toronto : Penguin Canada, 2009. Click HERE to view details about this title.
2 thoughts on “A Positive New Year’s Resolution : TFSAs”
Good article – thanks!
I am not sure if I can save a lot by using these tax-free accounts, but at least I will have some commitment to put aside some extra cash and save.
My husband and I already have our TFAs that help us in maintaining our business in good shape. Depositing money in different banks is also a great strategy in increasing receivables, which assures our future and our 10 employees’ too. We need to secure alternatives in financing so that we can pay for our mortgages and for our people’s salaries.