Tax Free Savings Account - What is it and how can it benefit you?

A tax free savings account (TFSA) is a registered savings vehicle which allows Canadians to save a pre-determined amount of money ($5,000 for 2009), tax free, annually, for life.

As of January 2009, Canadians can now earn investment or savings income tax-free through the new tax-free savings account (TFSA) which was introduced in the federal budget.

The tax-free savings account should not replace other registered plans such as RRSPs or RESPs, it should instead be used in conjunction with such plans.

Who is eligible for a TFSA? Any resident of Canada who is 18 years of age or older with a valid social insurance number.

How do I setup a TFSA? You can setup a TFSA through your financial instution. A valid birth certificate and social insurance card is required for registration of the TFSA.

How much am I allowed to contribute to a TFSA? The limit for 2009 is $5,000.00. Also, any unused portions of a TFSA are carried over to the following year.

What types of investments are allowed in TFSA? Typically, investments such as mutual funds, GIC (Guaranteed Income Certificates) and bonds. Pretty much the same types of invesments that you might find in a RRSP.

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