Tax Free Savings Accounts (TFSA) Info

The Tax-Free Savings Account (TFSA) is a flexible, registered general-purpose savings vehicle that allows Canadians to earn tax-free investment income to more easily meet lifetime savings needs. The TFSA could be best described as a Tax Free Investment Account because you can invest in stocks, term deposits, and mutual funds as well as applicable savings accounts.

The TFSA was started in 2009 allowing an investment of up to $5,000 per Canadian who is 18 years old or older.  The $5,000 amount is cumulative, meaning that if you haven't invested in a TFSA before, as of 2011 you could invest up to $15,000 ($5,000 for each investible year).  In January, 2012 you will be able to invest up to $20,000.

How the Tax-Free Savings Account Work:

2011 Personal Tax Levels

As we have recently started 2011, it is always good to plan how to protect your money from taxes.  The following is some tax information that you may want to review for tax planning purposes throughout the year.

The Federal Income Tax rates for 2011 are as follows:
•15% on the first $41,544 of taxable income
•22% on taxable income between $41,544 and $83,088
•26% on taxable income between $83,088 and $128,800
•29% of taxable income over $128,800
The Federal Basic Personal Amount in 2011 is $10,527

The Alberta Income Tax rate is 10% of taxable income.  The Alberta Basic Personal Amount is $16,977.

CPP Info
Maximum Pensionable Earnings:            $48,300
Basic Exemption                                     $3,500
Rate                                                             4.95%
Employee & Employer Maximum            $2,217.60
Self Employed Maximum                       $4,435.20

Good Financial Information

Over the past 2 weeks various publications across Canada have shared some great articles about retirement planning with us.  I would like to share a few of these with you below:

Is Freedom 75 boomers' new goal? - Noreen Rasbach, Globe and Mail Blog

CDNs have admirable financial goals but lack proper tools - Stefania Moretti, Money Canoe.ca

Were RRSPs a major mistake? - John Newell, Financial Post

Forget what you've been taught about retirement saving - Gail Vaz-Oxlade, Globe and Mail

The key to a happy retirement - Patricia Lovett-Reid, MSN.ca Money

Taking baby steps into financial adulthood - Jodi Lai-Reichman, Financial Post

TFSA vs. RRSP – Best Retirement Vehicle? - Ed Rempel, Milliondollarjourney.com

The last article helps answer a questions that has been asked a lot over the past two and a half years that the TFSA has been around.  I hope these articles help you, and if you have seen an article that you think is useful, please post a link in the comments below.  Jerry

Tax Free Savings Account

The Tax-Free Savings Account (TFSA) is a flexible, registered general-purpose savings vehicle that allows Canadians to earn tax-free investment income to more easily meet lifetime savings needs. The TFSA complements existing registered savings plans like the Registered Retirement Savings Plans (RRSP) and the Registered Education Savings Plans (RESP).

How the Tax-Free Savings Account Works

• A limit of one TFSA per person. Similar to RRSPs, this account is reported to the Canada Revenue Agency.
• Contributions to a TFSA will not be deductible for income tax purposes but investment income, including capital gains, earned in a TFSA will not be taxed, even when withdrawn.
• Unused TFSA contribution room can be carried forward to future years.
• You can withdraw funds from the TFSA at any time for any purpose.
• The amount withdrawn can be put back in the TFSA at a later date (not within the same calendar year) without reducing your contribution room.
• Neither income earned in a TFSA nor withdrawals will affect your eligibility for federal income-tested benefits and credits.
• Contributions to a spouse’s TFSA will be allowed and TFSA assets can be transferred to a spouse upon death.