What kinds of investments are prohibited for the Tax-Free Savings Account?
You are not permitted to invest in entities where you do not deal at arm’s length. Where a Tax-Free Savings Account holds a prohibited investment, a tax of 50% of the fair market value (FMV) of the prohibited investment will be applied. What if I contribute excess amounts in my Tax-Free Savings Account (TFSA)? Similar to an RRSP, excess contributions to a TFSA will be subject to a 1% per month penalty tax until withdrawn. How will Tax-Free Savings Accounts be taxed? The big advantage to the Tax-Free Savings Account (TFSA) is that any income and gains on investments held within it will not be taxed either while held in a TFSA or upon withdrawal, hence the name – Tax-Free Savings Account. What if I borrow to invest in my Tax-Free Savings Account (TFSA)? Since the income earned inside a TFSA along with TFSA withdrawals are non-taxable, you won’t be able to write off any interest expense on funds borrowed for the purpose of investing in a TFSA. Could I use my Tax-Free Savings Account(TFSA)
