The New Tax-free Savings Account

Beginning January of 2009, the new tax-free savings account that was proposed in the 2008 Federal Budget will come into operation.

The new legislation allows taxpayers who are at least 18 years of age to contribute up to $5,000 annually (which accumulates if unused) to a tax-free savings account.

Unlike an RRSP, contributions are not deductible. However, all interest, dividends, capital gains and other income earned in the tax-free savings account are not taxable (provided the tax-free savings account holds qualifying investments and the contribution limit has not been exceeded). The original capital, plus all of the income that has accumulated, can be withdrawn from the tax-free savings account at any time.

In addition to allowing savings to grow tax-free, the tax-free savings account has other benefits, one of which is that withdrawals from the account will not impact certain income-dependent benefits (such as the Canada Child tax benefit).

For more information on the tax-free savings account, see the Canada Revenue Agency’s website at:
http://www.cra-arc.gc.ca/gncy/bdgt/2008/txfr-eng.html#q17

For more information on this topic contact Pushor Mitchell Associate Melody Hope at:
hope@pushormitchell.com or (250) 869-1210