The annual contribution for tax-free savings accounts (TFSAs) will increase by $500 to $5,500 in 2013, said Minister of State (Finance) Ted Menzies and Minister of National Revenue Gail Shea.
Since the federal government made TFSAs available in 2009, Canadians have been able to earn tax-free investment income on contributions of up to $5,000 per year. Canadians can earn tax-free income through a range of investment products. About 8.2 million Canadians have opened a TFSA and roughly 2.5 million Canadians contributed the maximum amount in 2011.
The ministers highlighted key features of the TFSA, which include the following:
• a TFSA is available to all Canadians, 18 years and older
• any interest, dividends and capital gains earned in a TFSA are not subject to tax
• a TFSA allows you to invest in a number of types of investments, be it a high-interest savings account, mutual funds, guaranteed investment certificates, listed securities, or other types of qualified investment products
• unused TFSA contribution room is carried forward and accumulates for future years
• funds available in your TFSA can be withdrawn tax-free at any time for any purpose — you can re-contribute withdrawn amounts in the same year only if you have unused TFSA contribution room (otherwise, you have to wait until the following year)
• income earned in a TFSA and withdrawals do not affect your eligibility for federal income-tested benefits and credits; and
• contributions to a spouse’s or common-law partner’s TFSA are allowed.
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