Learn More About TFSAs JUMP AHEAD TO How can I set up my TFSA? How much can I contribute to the TFSA per year? What are the key taxation differences between a TFSA and RRSP? What kind of investments can I hold in my TFSA? What is the TFSA?   The Tax-Free Savings Account (TFSA) is a government initiative that allows Canadians to save their money and have the interest grow tax-free. Withdrawals from the account are not taxable. However, contributions to the account are not deductible for tax purposes. How can I set up my TFSA? Starting in 2009, Canadian residents age 18 or older can open an account at most financial institutions such as Canadian banks, brokerage firms, trust and life insurance companies, (the same institutions that are currently eligible to issue a Registered Retirement Savings Plan). You would have to provide the issuer with your social insurance number when the account is opened. You are permitted to hold more than one TFSA. How much can I contribute to the TFSA per year? Each year you can contribute an amount up to your contribution room for the year. Your TFSA contribution room would be made up of three amounts:   Each year you would be allocated and allowed to contribute up to $5,000 (this annual amount will be indexed to inflation and rounded to the nearest $500 on a yearly basis). In addition, any withdrawals made in the previous year would be added to the contribution room for the year. Any unused contribution room from the previous year would be added to the contribution room for the year. Please refer to this example from the Canada Revenue Agency's website (assuming no indexing):   In 2009 you would be allocated and allowed to contribute up to $5,000. If you only contribute $2,000, an amount of $3,000 would be carried forward to 2010. Your contribution room for 2010 would then be $5,000 plus $3,000, or $8,000. Source: http://www.cra-arc.gc.ca/gncy/bdgt/2008/txfr-eng.html What are the key taxation differences between a TFSA and RRSP?     TFSA   RRSP Taxes: Contributions   Not tax deductible   Tax deductible Taxes: Withdrawals   Not Taxable   Added to income and taxed at current rate Taxes: Investment earnings   Not Taxable   Sheltered from tax during accumulation period What kind of investments can I hold in my TFSA? A TFSA would generally be permitted to hold the same investments as a registered retirement savings plan. This would include mutual funds such as LifePoints Portfolios publicly traded securities, GICs, bonds, and certain shares of small business corporations. Government sites Department of Finance TFSA calculator Canada Revenue Agency Q&A Department of Finance TFSA Information Guide			Additional RESOURCES Department of Finance TFSA calculator Canada Revenue Agency Q&A Department of Finance TFSA Information Guide

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