Tax-Free Savings Account

Save Money Using a Tax-Free Savings Account

The Tax-Free Savings Account (TFSA) was implemented by the government of Canada effective January 1, 2009. The TFSA is a savings vehicle to help eligible Canadians not only save, but save tax-free.

Generally, interest earned through a savings account is taxed by the Canadian government. However, interest, dividends or capital gains earned through a TFSA are not taxed, even when it is withdrawn.

Eligible Canadians can contribute $5,000 every year starting January 1, 2009. In 2013, this TFSA limit was increased to $5,500 annually. In order to be eligible for a TFSA, an individual must be 18 years or older, be a resident of Canada and have a valid Canadian social insurance number (SIN).

In order to maximize the benefit from your TFSA, you need to understand the benefits, know how to set up a TFSA, understand contribution room, implications when making withdrawals, when taxes may be payable, and much more. This web page is dedicated to helping individual Canadians understand and leverage the power of Tax-Free Savings Accounts in 2014.

Video Overview of Tax-Free Savings Account (TFSA)

Benefits of a Tax-Free Savings Account

So why should you have a Tax-Free Savings Account? There are several benefits of having a TFSA as discussed below:

• Tax-Free Savings: given that you don't pay taxes on the interest, dividends or capital gains generated in your TFSA, you can grow your savings at a much more accelerated pace.

• Tax-Free Withdrawals: the TFSA provides flexibility if you need to withdraw your money if an emergency arises and the money withdrawn is not taxed.

• Re-Contribution to TFSA: in case you had to withdraw money from your TFSA, you are allowed to re-contribute the amount beginning in the year following the withdrawal.

• Investment Options: you have a wide range of investment vehicle options like Savings Account, High Interest Rate TFSA, GICs and Term Deposits, Mutual Funds, ETFs/Equities, etc.

• Non-Registered Investing: if you trade or invest in the stock markets using equities and/or ETFs, you can benefit from the TFSA by not having to pay taxes on dividends and capitals gains.

• RRSP Maxed Out: if you are one of those who has maxed out on your RRSP contributions, a TFSA is a welcome break to save extra money tax-free.

Note: Before attempting to deposit or withdraw funds in and out of your TFSA, be sure to familiarize yourself with the TFSA rules outlined in the next section.

Tax-Free Savings Account Rules

Contribution Room: Effective January 1, 2009, you are allowed to contribute $5,000 annually (indexed to inflation and rounded to the nearest $500) to your TFSA. If you have not contributed to your TFSA in previous years, you can add that amount to your contribution room.

Over-Contribution: If you have over-contributed to your TFSA, you will be liable to a on 1% tax on your highest excess TFSA amount in that month. If you make TFSA contributions while you were a non-resident of Canada, you will be charged 1% monthly tax on these contributions.

Multiple TFSA Accounts: You are allowed to have more than one TFSA account so long as the total amount contributed does not exceed your allowable contribution room. If you transfer money from one TFSA to another, ensure it is a direct transfer, if not, you will be penalized by CRA for over-contribution.

TFSA Withdrawals: You can withdraw funds from your TFSA account at any time, for any reason, without having to pay taxes on the withdrawn amount. You are not allowed to contribute more than your TFSA allowable contribution room in any given year, even if you have withdrawn from the account during that year.

TFSA Online Resources

Canada Revenue Agency Official Website
This is the official Canada Revenue Agency (CRA) website pertaining to the Tax-Free Savings Account. You will find more information on TFSAs as well as forms and publications.

Tax-Free Savings Account Calculator
This TFSA calculator estimates the income tax savings you can realize in a TFSA. It compares the future value of an investment in a TFSA with the future value of the same investment made in a taxable account and estimates the total tax savings.

Toronto Mayoral Election 2014

The City of Toronto has made headlines around the world for many reasons this past year. A lot of the attention was brought about due to one of the most controversial Mayors that Toronto has had in recent years, Rob Ford. Much of the spotlight was due to Mr. Ford’s substance abuse, his bigger than life persona, and alleged ties to people like Alexander Lisi, who will face trial on drug charges next year.

Ever since Mr. Ford was elected as Toronto’s 64th mayor in 2010, he has often made headlines for the wrong reasons like: distracted driving, appearing intoxicated at some public events like St. Partick’s Day in 2012, smoking crack-cocaine, lying about smoking crack, and then admitting that he did, and the list goes on. He finally went to rehab and after checking out, he was diagnosed with an abdominal tumor for which he was hospitalized and had to undergo chemotherapy. Mr. Rob Ford’s serious health condition caused him to withdraw from the mayoral race. And at the last hour of the nomination deadline, his brother Doug Ford jumped into the mayoral race. I wish Mr. Rob Ford nothing, but the best.

The 2014 Toronto mayoral campaign seems to have gone on forever. It began in January 2014 and has drawn a lot of press and public attention. In my 15 plus years in Canada, I’ve never seen so much of public interest in mayoral elections. Whatever attention the Ford brothers have drawn, I think it’s been good to see people get more involved in the political scene. There are many big issues that need to be dealt with like jobs and the economy, public transit and gridlock, property taxes, and city services.

At the beginning, there were over 60 candidates that registered to run for mayor. The top 5 candidates after Rob Ford withdrew from the race were John Tory, Doug Ford, Olivia Chow, Karen Stintz, and David Soknacki. On August 21, 2014, Karen Stintz (TTC chair and City Councilor) withdrew from the mayoral race. And on September 10, 2014, David Soknacki followed suit as their support wasn't growing fast.

Currently, the top 3 mayoral candidates (as per polls) are: John Tory in the lead, followed by Doug Ford, and Olivia Chow a distant third. Each of these three candidates have their own platforms that differ from each other. There have been over 50 debates so far, many of which have been very heated, but civil, for most part. One thing is clear, this year’s mayoral election has generated much more public interest than previous ones, including interest from the younger demographic. Hopefully, this positive public interest will get more people out to vote and result in a record voter turnout.

In case you’re still undecided, you can check this article at Toronto Star in which Laura Amstrong provides a handy guide outlining the Toronto Mayoral Candidates Platforms. Also, you may be interested in taking this test, from the National Post, to find out Which Toronto Mayoral Candidate Are You? 

We live in one of the most beautiful countries in the world, in which we often take our right to vote, for granted. I urge you to please exercise your democratic right to vote. Every vote counts, so get out there, on October 27, 2014 and proudly cast your ballot.

Photo Credit: Toronto Skyline by governmentlists, Public Domain via Pixabay

Canada Stands Strong in the Face of Parliament Hill Shooting

National War Memorial Ottawa

This week has been a rather shocking and sad one, not only for Canadians, but around the world as Canada came under attack by two radicalized individuals who allowed their ideology of hate take two innocent lives.

On October 20, 2014 a Canadian soldier (Warrant Officer) Patrice Vincent was run over by a vehicle driven by Martin Couture-Rouleau in St-Jean-sur-Richelieu, Quebec. This was a targeted hit-and-run, but police were able to catch up with Couture-Rouleau who was killed following a high-speed chase.

On October 22, 2014 another Canadian soldier, Corporal Nathan Cirillo, who was standing guard at the National War Memorial in Ottawa, was shot by Michael Zehaf-Bibeau. He then proceeded to the Canadian Parliament, the Centre Block, where MPs were attending caucus meetings. Zehaf-Bibeau was confronted and killed by Parliament security, in the Centre Block.

I watched a lot of this action as it unfolded on live TV and was shocked to see Canada come under attack by these radicalized individuals. Watching the cell-phone video, taken by a Globe & Mail journalist, was chilling, as a barrage of shots rang out. These two attacks against Canadian armed forces and the Canadian Parliament are attacks on every Canadian.

I’ve personally not seen anything like this in my 15 plus years in Canada. Is Canada coming under attack because we joined forces to support the war against ISIS/ISIL? Probably. I guess, though I was shocked to see these terrorist attacks unfold on Canadian soil, I’m not completed surprised. Canada is a peaceful country and mostly joins forces in peacekeeping roles when called upon by the world. Therefore, I had mixed feelings about Canada joining forces against ISIL in a combative role. Canadians were divided in terms of sending our troops to war against ISIL, but because the Conservative government of Canada has a majority in the Parliament, the motion passed through.

Having said so, it’s too late for this to be undone at this time and we as Canadians need to stand together, shoulder to shoulder, and heart to heart. As our National Anthem goes…”O Canada, we stand on guard for thee”. And this is exactly what I’ve seen so far, as Canada came together during a very sad week. I feel proud to be Canadian because even though we were shocked and saddened, as we witnessed these cowardly acts, and sad events unfold during this week, Canadians showed solidarity.

The Canadian Parliament resumed the very next day with all the MPs meeting as scheduled in the House of Commons to show commitment and resolve. It was great to see the government and opposition both stand together as they honored Kevin Vickers, the sergeant-at-arms, who played a pivotal role in bringing down Zehaf-Bibeau in the Centre Block.

Global leaders from every corner of the world publicly sent in their support and condolences. From our southern neighbours in the US to Israel to Australia and New Zealand, messages of support and solidarity poured in. Though these sad events caused a lot of pain and grief, it was comforting to see how Canadians and the world came together, especially the outpouring of support by fellow Canadians.

Also, it was very touching to see all the people who came out to show their support as Corporal Nathan Cirillo's body was making its way from Ottawa to Hamilton, passing through the Highway of Heroes.

My thoughts and prayers are with the families and loved ones of WO Patrice Vicent and Corporal Nathan Cirillo, and all those affected. May the souls of these two heroes rest in eternal peace. Also, my heart goes out to the families of the two radicalized individuals who perpetrated these criminal acts of violence.

The world as we know it is changing and we need to stay vigilant, but most importantly we need to stand united and together. ”O Canada, we stand on guard for thee!” #CanadaStrong

Photo Credit: National War Memorial (CC BY-SA 3.0)