Explaining our Government’s New Tax-Free Savings Account


Moore from Ottawa
By Fundy Royal M.P. Rob Moore
March 25, 2008


Greetings from Ottawa,

With Budget 2008 our government introduced the single most important personal savings vehicle since the introduction of the RRSP in the 1950’s: the Tax-Free Savings Account (TFSA). This flexible, registered, general-purpose account will allow Canadians to watch their savings grow, tax free. It will benefit everyone from young adults who are saving for their first car, to families buying their first home, to seniors who are building their retirement income. This is how it works:
  • First, Canadians can contribute up to $5,000 every year to a registered Tax Free Savings Account. Any unused room can be carried forward to future years;
  • Second, the investment income earned in the plan, including capital gains, will be exempt from any tax, even when withdrawn;
  • Third, Canadians can withdraw from the account at any time without restriction, whether it’s for a new home, a new car, or a family vacation; and
  • Finally, the full amount of withdrawals may be re-contributed to the TFSA in the future. This ensures no loss in your total savings room.
While the RRSP is primarily designated for retirement, the TFSA is like an RRSP for everything else in your life. To make it easier for lower and modest income Canadians to save there will be no claw backs. Neither the income or capital gains earned in a TFSA nor the withdrawals from it will affect eligibility for federal benefits such as the Guaranteed Income Supplement.

The TFSA will be available to all Canadians on January 1, 2009. I encourage you to see the potential of this new initiative by visiting the TFSA calculator on the Finance web site at: www.budget.gc.ca I always enjoy hearing from constituents and welcome your feedback and questions on issues important to you at moorer@parl.gc.ca