Tax Free Savings Accounts (TFSAs)

The newest tax shelter available for individual investors, introduced in 2009, TFSAs allow any Canadian resident age 18 or older (no maximum age limit) to contribute up to $10,000 per year. Eligible investments that can be held inside a TFSA are generally the same as an RRSP, namely GICs, Segregated Funds, GMWBs and Mutual Funds, amongst others. Unlike RRSPs, earned income is not a requirement and therefore there is no tax deduction for contributions. However, similar to RRSPs all investment growth inside a TFSA is tax sheltered. Any withdrawals from a TFSA are not considered taxable income - i.e. are tax free. There is no legislation requiring that withdrawals must begin at a specified age (unlike RRSPs). And any withdrawals can be re-contributed in the following year along with the "new money" contribution for the current year.