Tuesday, March 08, 2011

ARGH! Can I just get a straight answer please? TFSA

Well, I've been doing some research on the Canadian Tax Free Saving Account.  I have been getting some mixed answers on a few things and thought I should be able to clarify this online.  Wrong.  Just more questions.  I went to the Cdn. Gov't website and found some good info, but it seems a little vague and I'm not one to appreciate some "surprises" if I did something they deemed wrong.

www.tfsa.gc.ca  I looked up the pamphlet and found examples such as this:

How the TFSA Works 

  • Starting in 2009, If you are a Canadian resident aged 18 and older, you can save up to $5,000 every year in a TFSA.
  • Your contributions to a TFSA are not deductible for income tax purposes but the investment income, including capital gains, earned in your TFSA is not taxed, even when withdrawn.
  • Your unused TFSA contribution room is carried forward and accumulates for future years.
  • You can withdraw funds available in your TFSA at any time for any purpose — and the full amount of withdrawals can be put back into your TFSA in future years. Re-contributing in the same year may result in an over-contribution amount which would be subject to a penalty tax.
  • Neither income earned in a TFSA nor withdrawals affect your eligibility for federal income-tested benefits and credits.
  • You can provide funds to your spouse or common-law partner to invest in their TFSA.
  • TFSA assets can generally be transferred to a spouse or common-law partner upon death.
Full Flexibility to Withdraw and Re-contribute
Gillian saves $3,000 a year for 10 years in a TFSA. She decides to start a small business and withdraws $40,000 of her TFSA savings, tax-free. A number of years later, Gillian decides to re-contribute the $40,000 to her TFSA. She may do so without reducing her other available contribution room.

By the Gillian example, obviously she contributed $30, 000 and pulled out $40, 000 and was allowed to put the $40, 000 back in, just not that same year.  She had made $10 000 in interest.  SOOO, thinking way out of the box here, If she put in $30, 000 and pulled out $100, 000 she'd be able to put back $100 000 in another year?

That's the real benefit I see of TFSA.  Hoping that is indeed true.  I just keep figuring there must be some great tax benefits to this that all the rich people must know about.   The rest of us think it is just a bank savings account.   Wonder how long it will stick around?
Any thoughts?  Am I way out to lunch?  By the by, I'm still searching! (and learning)

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