Ottawa, December 30, 2011
Archived - Save More in 2012 With the Tax-Free Savings Account
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The Honourable Jim Flaherty, Minister of Finance, and the Honourable Gail Shea, Minister of National Revenue, today highlighted that, as of January 1, 2012, Canadians will have a new $5,000 of room to invest in their Tax-Free Savings Account (TFSA).
“TFSAs will continue to enable Canadians to more easily meet their savings goals by allowing them to earn investment income absolutely tax-free,” said Minister Flaherty. “Savings contribute to economic growth by increasing the funds available for economic investment, which leads to a higher capacity to produce goods and services and improves the standard of living of Canadians.”
“Approximately 8.2 million TFSA accounts have been opened to date, and we expect that number to grow,” said Minister Shea. “We are thrilled to see Canadians taking advantage of this savings vehicle.”
The TFSA is a flexible, registered, general-purpose savings vehicle that allows Canadians to earn tax-free investment income.
A TFSA can contain a range of investments, similar to those in a Registered Retirement Savings Plan, such as mutual funds, listed securities and guaranteed investment certificates.
Each year, an individual’s annual TFSA contribution room is made up of three components:
- the annual TFSA dollar limit of $5,000;
- any unused contribution room from the previous year; and
- the total amount of withdrawals from the individual’s TFSA made in the previous year.
Key features of the TFSA to keep in mind:
- If you are a Canadian resident aged 18 and older, you can save up to $5,000 every year in a TFSA.
- Your contributions to a TFSA are not deductible for income tax purposes but the investment income, including capital gains, earned in your TFSA is not taxed, even when withdrawn.
- Your unused TFSA contribution room is carried forward and accumulates for future years.
- You can withdraw funds available in your TFSA at any time for any purpose—and the full amount of withdrawals can be put back into your TFSA in future years. Re-contributing in the same year may result in an over-contribution amount which would be subject to a penalty tax.
- Neither income earned in a TFSA nor withdrawals affect your eligibility for federal income-tested benefits and credits.
- You can provide funds to your spouse or common-law partner to invest in their TFSA.
- TFSA assets can generally be transferred to a spouse or common-law partner upon death.
For more information on TFSAs, please visit the Canada Revenue Agency website or contact your financial institution.
For further information, media may contact:
Mary Ann Dewey-Plante
Office of the Minister of Finance
Department of Finance
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