What is a Tax Free Savings Account (TFSA)?
Overview A Tax Free Savings Account (TFSA) is a savings tool new to Canadians starting 2009. All investment income generated in the account is not subjected to tax. The contribution limit for 2009 is $5,000, which can be carried forward indefinitely. Eligibility Any Canadian resident age 18 or older with a Social Insurance Number can open a TFSA. Why Take Advantage of a TFSA? Income Splitting Opportunities TFSA allows for income splitting opportunities between higher and lower income spouses given that attribution rules do not apply for income earned within the account. When considering the eligibility rules stated earlier (that the contribution room is not based on earned income) in theory a stay at home spouse could have the income earner of the family contribute toward both their TFSA and towards that of the stay at home spouse, with the end result being a lower family tax bill. This is an effective tax splitting strategy as long as each spouse has a different marginal tax rate (whi
