(NC)-The Federal Government is offering Canadians a new way to save with the introduction of the Tax-Free Savings Account (TFSA) in January 2009. Some banks, like ING Direct, have always advocated the importance of saving and provide products to help Canadians save more of their hard earned money. The TFSA is another product that continues the tradition of saving by keeping withdrawals and investment income tax-free. Here are 10 things you should know about TFSAs:
1. All Canadian residents can open a Tax-Free Savings Account if they're 18 years of age or older and have filed a tax return.
2. The Tax-Free Savings Account will let you invest while not being taxed on the interest earned or investment earnings.
3. You'll be able to open Savings accounts, GIC's and Mutual Funds… tax-free.
4. Unlike an RSP, your contribution to a Tax-Free Savings Account will not be deducted from your income on your tax return, but the interest you earn will not be taxed - so you get to keep what you earn.
5. You can contribute a maximum of $5,000 a year.
6. If you take money out of your Tax-Free Savings Account, you don't lose the contribution room - you get it back in the following year. This is important to remember, because if you take it out you will have to wait until the next year before you can put the money back in.
7. If you don't make the maximum contribution you don't lose the contribution room. The unused contribution room gets carried over to the following year. There is no limit to how much contribution room can be carried forward.
8. You can hold more than one Tax-Free Savings Account with a number of financial institutions but the total of the contributions must be within your total contribution limit in that year.
9. Money you take out of your Tax-Free Savings Account will not affect federal income-tested benefits and credits, so you're not penalized for saving.
10. Each year, the government will determine your remaining available Tax-Free Savings Account contribution limit.
To find out more about the TFSA, visit www.ingdirect.ca/tfsa or call 1-800-464-3473.
- News Canada