Tax-Free Savings Accounts are flexible, general-purpose savings vehicles that will allow Canadian taxpayers 18 and over to make annual contributions of up to $5,000 in 2009. (This amount will be indexed in future years to the nearest $500.)

• Investment income (including capital gains) earned within a TFSA is not taxed, even when you withdraw it
• Your unused TFSA contribution room is carried forward to future years
• You can take money out at any time, for any purpose
• You don't lose contribution room when you make withdrawals (your contribution room will be replenished in the next year to reflect the amount you have taken out)
• You can provide money to a spouse for him/her to contribute without being subject to income attribution rules

2. How are they similar to RRSPs?

• Your investment earnings within a TFSA compound tax-free
• Excess contributions will attract a 1%/month penalty
• TFSA fees and interest on borrowing money for TFSA contributions are not tax deductible

3. How are they different from RRSPs?

• Contributions are not tax-deductible
• Withdrawals are non-taxable
• Contribution limits are not based on income
• Spousal plans are not available

4. What are the advantages?

• TFSA withdrawals are not taxed
• Funds can be withdrawn at any time
• The value of the TFSA at death can be transferred to a spouse on a tax-free basis
• If you bequeath the TFSA assets to your heirs and they have TFSA room, they can use the money to contribute to their own TFSA
• Unused contribution room is carried forward indefinitely
• TFSA income has no effect on benefits or tax credits / income claw-back
• There is no age limit nor are there forced withdrawals
• Contribution limit is indexed to inflation (rounded to the nearest $500)

5. Who can benefit?

All Canadian residents over 18!

• People who have already maxed our their RRSPs, and want savings to grow tax-free
• People who want easy access to funds before retirement, and want to keep their investment income tax-free
• People who have savings and want to protect their investment earnings from taxation (and from those earnings negatively impacting such programs as Old Age Security benefits, the Guaranteed Income Supplement, or the Age Credit Amount).

6. Who offers TFSAs?

Trust companies, licensed annuities providers (Life insurance companies*), credit unions and members of the Canadian Payments Association (Banks) can all issue TFSAs. Any company that currently offers RRSPs will be able to offer TFSAs.

*Since there are some circumstances where creditor protection may not apply, policyholders should consult a legal advisor to find out if they are eligible for this type of protection.