TAX FREE SAVINGS ACCOUNT (TFSA)

    The tax-free savings account (TFSA) has become one of Canada’s best investment options over the past 20 years. With that beings said let’s take a look at what you need to know about TFSA before setting one up.
    First off, tax-free savings accounts are not necessarily savings accounts. Yes, you read the right. TFSA is just a name given to several different investment vehicles to significantly to the government the tax implications regarding your investments. Let’s break it down in an easy-to-understand manner. When we talk about investment vehicles we are referring to things like
    • Stocks
    • Mutual Funds
    • Savings Account
    • Segregated Funds
    • Guaranteed Minimum Withdrawal Benefits

    And the list goes on.

    Did you know you can take any one of those investment vehicles and register them as tax-free savings accounts? Take stocks, for example, let’s say you own apple, Amazon and Tesla. You can set up your account so those are held as a TFSA. The reason you would choose to do this is that it could be tax advantageous for you. Here’s how the taxes work on TFSAs.
    • The money you contribute to a TFSA is considered to be after-tax dollars.
    • Your TFSA grow tax-free
    • When you withdraw from your TFSA it is also tax-free
    If you notice, the money you contribute to TFSA is after-tax dollars. The way the government looks at this is you’ve already paid your “fair share” and now are being encouraged to save for a future date.
    The growth on your account is also tax-free, unlike non-registered investments. So if you do hold an account like stocks, mutual funds or segregated funds inside your TFSA you’ll not have to pay additional tax on the growth of your accounts. When you factor in many markets that have done around 7% or greater that can be a significant amount of money that you do not have to pay tax on.
    For many Canadians when they retire they are retiring into a larger tax bracket than they planned for. This makes the tax-free withdrawal a perfect solution as it will not add to your total income.

    TFSA can be a great investment if you utilize it correctly. For more information or help setting up your TFSA please contact us and one of our representatives would be happy to help.