Tuesday, January 17, 2012

Tax-Free Savings Accounts (TFSA)
In the latest survey 13% of Canadians don’t know what it is?

One question that was asked, it was about who is responsible regarding the account?
23% said it was the bank.
12% said it was the government and
7% said that it was their advisor’s responsibility.

Well guess what the answer is? It’s the account holder, as in you and no one else.
The survey also asked about how it worked?
37% had some idea.
14% didn’t know at all.
13% didn’t even know what a TFSA is.

Question about the number of TFSA accounts one can have?
27% think that they can have only one.
35% of surveyed thought that they may get a tax deduction for the contribution.
8% thought that they did receive a tax deduction.

Question regarding taxing the withdrawals?
10% of surveyed thought that they would be taxed.
33% were not sure.

Come on people the rules for a TFSA is NOT difficult.
Here are the rules:
You must be 18 years old (or older) to open an account.
You can contribute up to $5000.00 per year.
From January 1, 2009 the total that you may have contribute is now at $20000.00 per person

You can have as many accounts as you wish - but you cannot contribute more then the $20000
The contribution room is NOT - a don’t use it, lose it type, the limit will just keep growing every year.
So no worries about putting in the max every year.

You can invest into anything including; Stocks, Bonds, GIC’s..etc.

You can withdraw you money at anytime BUT, you cannot re contribute and exceed your maximum allowable contribution.

TFSA - Withdrawals or monies earned DO NOT get added to your income if you are collecting GIS or other social benefits.
Income earned in your TFSA is tax exempt - even after you withdrawal the money.
Beware of over contributions, which have penalties.

See CRA’s website for more details on these over contributions.
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/menu-eng.html
 
An example:
deposited $5000.00 January 3rd
Withdrawn $1500.00 June 25th,
You cannot re: contribute the $1500.00 before the beginning of the next year.

Account balance $3500.00
You MUST wait for the start of the next calendar year.

Cont. Example: 1500 + 5000 = $6500.00
Is the max that you can contribute the following year.

Is the maximum that you can contribute in the second year.
* no investment income included in the summary.