Tax Free Savings Account - Makk Financial Services

The Tax-Free Savings Account

What is The Tax-Free Savings Account?

The TFSA program was established in 2009 and allows individuals who are 18 years of age or older with a valid social insurance number to save money tax-free over their lifetime. Unlike RRSP contributions, contributions to a TFSA are not tax-deductible. However, any amount contributed and income earned in the account, including investment income and capital gains, is generally tax-free, even when withdrawn. It’s important to note that administrative fees, as well as interest or money borrowed to contribute to a TFSA, are not tax deductible.

How to open a TFSA

To open a TFSA, you must contact your financial institution, credit union, or insurance company (issuer).

Provide your SIN and date of birth to the issuer to register your qualifying arrangement as a TFSA.
The issuer may request supporting documents.

Note: Providing incorrect or incomplete information may result in the denial of registration, which would require any income earned to be reported on your income tax and benefit return.

Types of TFSAs

There are three types of TFSAs offered, including deposits, annuity contracts, and arrangements in trust. Banks, insurance companies, credit unions, and trust companies can issue TFSAs.

● a deposit
● an annuity contract
● an arrangement in trust
Banks, insurance companies, credit unions and trust companies can all issue TFSAs. For more information about a certain type of TFSA, contact a TFSA issuer.

Self-directed TFSA

Individuals who prefer to manage their own investment portfolio by buying and selling different types of investments can set up a self-directed TFSA. For more information, contact a TFSA issuer.

Eligibility

Any individual who is a resident of Canada, has a valid SIN, and is 18 years of age or older can open a TFSA. Non-residents of Canada who are 18 years of age or older and have a valid SIN can also open a TFSA. Contributions made by non-residents of Canada will be subject to a 1% tax for each month the contribution stays in the account.

Non-residents of Canada

You could be considered a non-resident for tax purposes if you normally, customarily, or routinely live in another country and are not considered a resident of Canada, or if you do not have residential ties in Canada and either live outside Canada throughout the tax year or stay in Canada for less than 183 days in the tax year. Even if you no longer live in Canada, you could have residential ties in Canada that are enough for you to be considered a factual or deemed resident of Canada. Residential ties include a home in Canada, a spouse or common-law partner or dependents in Canada, personal property in Canada such as a car or furniture, or social ties in Canada. Other ties that can be relevant include a Canadian driver’s license, Canadian bank accounts or credit cards.