2009 is now half over.  Summer is here.  Nobody wants to think about taxes.  But really, now is a great time to get a headstart on that year end tax planning.

Everybody by now has likely heard about the new Tax Free Savings Account (TFSA).  In case you haven’t heard about it yet, or you weren’t listening, here goes:  Effective January 1, 2009 any Canadian resident at least 18 years old, who has a Social Insurance Number, can put money into their TFSA.

Money that you put into a TFSA can earn income tax-free.  You can put up to $5,000 per year into your TFSA.  So, that $5,000 can earn interest, capital gains, dividends etc without you paying any tax on it.  And then, when you withdraw it, it’s still tax-free.  Not a bad deal.

The downside is that, unlike a Registered Retirement Savings Plan (RRSP) contribution, you do not get a tax deduction when you put money into the TFSA.

If you feel like reading more about it, you can go to: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/menu-eng.html

Filed under: Personal Tax by David Boese No Comments »