Here are some details on the new Tax-Free Savings Account introduced in last week’s budget.
Starting in 2009, Canadians 18 and older will be able to put up to $5,000 a year in a TFSA and rack up investment gains without paying taxes on them at any time, including withdrawal.
Saving for a car? You can drop $5,000 into a TFSA, invest safely in a high-interest savings account and then withdraw the money any time you want without paying a cent in taxes. If the account pays 4 per cent, you’d ordinarily get a tax bill of about $80. It’s a modest saving but it’ll add up. Once you’ve pulled your $5,000 out, you can recontribute that money at any time. Likewise, you can catch up on contributions you didn’t make in previous years, and you can contribute to a spouse or a child’s plan.