Tax-Free Savings Account
Individuals who are 18 years of age or older may contribute annually to a TFSA and income earned on such amounts is sheltered from income tax. The maximum amount that can be invested in 2013 is $5,500.14 Unlike the RRSP, TFSA contributions are not deductible for tax purposes. However, capital and income withdrawals are not taxable.
The following table compares the main features of the most common registered plans, i.e. RRSP, RESP and TFSA.15
|Annual maximum||Lesser of:
|Deductibility||Deductible||Not deductible||Not deductible|
|Unused contributions room||Can be carried forward|
||Penalty of 1% per month||Penalty of 1% per month|
|Specific conditions||None||Beneficiary must pursue post-secondary education||None|
|Particularities based on savings objectives|
|Home purchase||Not intended for this purpose|
|Retirement||Accumulated savings must be withdrawn or transferred to another vehicle before December 31 of the year of the annuitant’s 71st birthday|
14 Amount indexed annually, rounded to the closest $500. The contribution limit for 2009-2012 was $5,000.
15 Parents who want to save for the financial security of a handicapped child can also invest in an RDSP (see Section 4).
16 Limit of $5,000 for first full-time session.
17 Under terms of Lifelong Learning Plan ($20,000) and HBP ($25,000).