What is a Tax-Free Savings Account (TFSA)?
TFSAs were created to help Canadians save and grow their money outside their RRSPs while earning tax-free investment income.
How Does a TFSA work?
- Any Canadian resident 18 years or older can hold a TFSA.
- Each year you can contribute up to a specified amount into your TFSA.
- Your money grows tax-free – when you withdraw funds you pay no tax, and you pay no tax on interest earned.
- If you didn’t maximize contributions in any given year, the unused contribution room accumulates and can be used in future years.
- You can withdraw funds without penalty and re-contribute to catch up in later years (recontributing in the same year may result in an over-contribution amount which would be subject to a penalty tax).
- Income earned in, or funds withdrawn from, a TFSA do not affect eligibility for certain benefits and credits such as Old Age Security or the Canada Child Benefit.
- TFSAs are flexible – you can invest in term deposits, GICs, mutual funds* or just leave it in a savings account. And, you can save for anything – a new car, a vacation, a home renovation or just a rainy day.
Libro offers many investment options to help your TFSA contributions grow tax-free. Even better, we help you create strategies to find balance between RRSP contributions, RESP contributions, TFSA contributions and contributing to your need for new shoes, a new truck or the odd night out for dinner from time to time.