Feds Ready to Deliver on Holiday Promise: Tax Free Savings Accounts mean more for you…and less for them!
Tax Free Savings Accounts or TFSAs come into effect January 1st, 2009 and the winner will be you! The federal government is delivering on a promise made in the budget earlier this year that you may have missed.
As you pack up the holiday decorations, you should be thinking of putting something away for yourself as well. Any income earned from funds invested through a TFSA is tax-free and you can put up to $5000 in the account. Future annual contribution limits will be indexed to inflation.
Greg Clarke, Partner with SB Partners LLP of Burlington says “an investor in the highest margin tax bracket would reduce their taxes significantly through the use of a TFSA.” The $5000 annual contribution limit is also cumulative, meaning that any room left in 2009 can be added to the following years. Funds can be withdrawn at any time.
“It is not a replacement for your RRSP” Clarke adds, noting that “the TFSA is designed for general savings either short or long term. Money in a TFSA can earn income tax-free and the accounts are perfect for additional retirement funds above your RRSP contribution room. They can also be used for major purchases such as a house, vacation or new vehicle,” he says.
With a struggling economy, savings rates for Canadians are at a historic low. This new Holiday Gift from the federal government is ideal for those who wish to put their money to work for themselves while reducing their tax payable.
Although the new Tax Free Savings Accounts can be opened through your financial institution or investment advisor now, contributions can begin after January 1st, 2009.
“We’re not used to the folks in Ottawa playing Santa. Canadians would be wise to accept this holiday gift,” Clarke adds.
For further information, contact Greg Clarke.
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