From the latest issue of MoneySense comes this list of 7 things you don’t know about Tax Free Savings Accounts. Note to any American readers: Canada’s TFSA is similar to Roth IRAs.
Here are senior writer Julie Cazzin’s seven facts. Click through above link for more complete explanation.
1.) Whatever amount you withdraw from a TFSA is added to your contribution room in the following calendar year.
2.) Interest, dividends and capital gains in your TFSA are not considered income, even when you withdraw the money.
3.) Interest on money borrowed to invest inside a TFSA is not tax-deductible.
4.) Accidental overcontributions to a TFSA are subject to a penalty of 1% for each month the overcontribution remains in the account.
5..) You can’t claim the tax credit on Canadian dividends if the stock producing those dividends is held within a TFSA.
6.) Management fees paid by a TFSA account holder will not be counted as part of your contribution, but they will also not be tax deductible for income tax purposes.
7.) You can open a TFSA for a child when he or she turns 18 but if you gift money to your child for a TFSA contribution, that money becomes the child’s.