TAX FREE SAVINGS ACCOUNTS
HAVE YOU HEARD ABOUT THE NEW TAX-KILLER OPPORTUNITY?
This time the government is not killing us with taxes...incredible!
The TAX FREE SAVINGS ACCOUNTS (TFSA) introduced by the Canadian Federal Government in the 2008 budget allows tax savvy Canadian residents aged 18 or over to save within a tax-advantaged vehicle, without being taxed for any income or gains. Starting in January 2009, individuals can deposit up to $5000 per year, indexed annually to inflation (& rounded to the nearest $500 increment) in a TFSA account... worry-free from tax!
There is NO tax on interest, dividends and capital gains earned within the TFSA account during the lifetime of the plan. Any withdrawals from the TFSA will be tax free as well.
Contribution room not utilized will be carried forward for use in future years. Even better, any tax-free withdrawals from the TFSA will subsequently increase the following year's contribution room available for future TFSA deposits.
There is NO attribution of income, so money can be gifted to a spouse without any taxable consequences. In addition, any withdrawals from the TFSA are not considered income for income-tested benefits like OAS, GIS, age credit, etc...
For example, a 19 year old depositing $5000 in 2009, then depositing the indexed maximum every year for the next 19 years could end up with approximately $240,000 in a TFSA account, while saving over $28,000 of tax. If s/he continued to deposit the maximum leading up to age 56, s/he could have over $1 Million in the TFSA while potentially saving over $177,000 in taxes. (Figures projected based on 4% inflation, 5% rate of return, 30% marginal tax rate. Individual circumstances will vary.)
Every smart Canadian should be considering the TFSA as their premier tax savings plan*.
What are you waiting for? Call me at 604-323-3830 to book an appointment today. This is an opportunity for you to kill some tax!
ONG Financial Planning Services Ltd.
John J. Ong BA CFP
Certified Financial Planner
* The TFSA will be a great complement to those already saving via RRSP. The efficient use of both a TFSA and RRSP should be evaluated with the assistance of a qualified financial services professional.