If so, Finance Minister Jim Flaherty hopes that you will take advantage of the new Tax-Free Savings Account (TFSA) he revealed in his third budget late last month.
Here's how the Tax-Free Savings Account will work:
- Starting in 2009, Canadian residents age 18 or older will be eligible to contribute up to $5,000 annually to a TFSA, with unused room being carried forward.
- Contributions will not be deductible.
- Capital gains and other investment income earned in the TFSA will not be taxed.
- Withdrawals will be tax-free.
- Niether income earned within a TFSA not withdrawals from it will affect eligibility for federal income-tested benefits and credits.
- Withdrawals will create contribution room for future savings.
- Contributions to a spouse's or common-law partner's TFSA will be allowed, and TFSA assets will be transferable to the TFSA of a spouse or common-law partner upon death.
- Qualified investments include all arm's-length Registered Retirement Savings Plan (RRSP) qualified investments.
- The $5,000 annual contribution limit will be indexed to inflation in $500 increments.
For more information on the TFSA, visit http://www.budget.gc.ca/2008/plan/chap3b-eng.asp
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