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Tax-Free Savings Account FAQ

The basics

1. What are Tax-Free Savings Accounts?

They are flexible savings vehicles. Canadian taxpayers who are 18 or older can use them to earn tax-free investment income.

  • You can invest up to $10,000 for years after 2014. The annual contribution limit was $5,000 for years 2009 to 2012 and $5,500 for years 2013 and 2014
  • Investment income (including capital gains) earned within a TFSA is not taxed, even when you withdraw it
  • Your unused TFSA contribution room is carried forward to future years
  • You can take money out at any time, for any purpose
  • You don't lose contribution room when you make withdrawals (contribution room will be added back in the next year to reflect the amount you have taken out)
  • You can give money to your spouse or partner for him/her to contribute without being subject to income attribution rules

2. Who are they for?

  • People who have savings and want to protect their investment earnings from taxation
  • People who have maxed out their RRSPs, and want to explore additional tax-efficient options
  • People who want easy access to funds before retirement, and want to keep their investment income tax-free
  • People who want to make sure that their savings don’t impact their eligibility for programs like Old Age Security, the Guaranteed Income Supplement, or the Age Credit Amount

3. How are TFSAs similar to RRSPs?

  • Your investment earnings within a TFSA compound tax-free
  • Excess contributions will attract a 1%/month penalty
  • TFSA fees and interest on borrowing money for TFSA contributions are not tax deductible

4. How are they different from RRSPs?

  • Contributions are not tax-deductible
  • Withdrawals are non-taxable
  • Contribution limits are not based on income
  • Spousal plans are not available

5. What are the advantages?

  • TFSA withdrawals are not taxed
  • You can take out money at any time
  • The value of the TFSA at death can be transferred to a spouse on a tax-free basis
  • If you leave the TFSA to your heirs and they have TFSA room, they can use the money to contribute to their own TFSA
  • Unused contribution room is carried forward indefinitely
  • TFSA income has no effect on benefits or tax credits / income claw-back
  • There are no age limits or forced withdrawals
  • Contribution limit is indexed to inflation (based on the Consumer Price Index (CPI) and rounded to the nearest $500)

6. What are the advantages of having a TFSA at Standard Life?

We have a wide range of products to choose from. You’ll be able find a product that reflects your savings and investment style.

Standard Life's term and segregated funds are considered insurance products, meaning they have built-in protection. Depending on which province you live in, our Ideal Term Funds and Ideal Segregated Funds may offer you potential creditor protection1, estate planning advantages and probate bypass opportunities.

Tip: If you want to enjoy the potential advantages offered by segregated and term funds, be sure they are held directly. Holding them in a trust or nominee account can mean that some of the benefits of insurance may not apply.

1Since there are some circumstances where creditor protection may not apply, policyholders should consult a legal advisor to find out if they are eligible for this type of protection.

7. Who offers TFSAs?

Trust companies, licensed annuities providers, credit unions and members of the Canadian Payments Association can all issue TFSAs. Any company that offers RRSPs can offer TFSAs.

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