Tax-Free Savings Account (TFSA)


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Frequently Asked
Questions

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Main features

Is there a minimum and maximum age for contributing to a TFSA?
If you are a Canadian resident, you can start contributing to a TFSA at the age of 18. There’s no maximum age for contributing to a TFSA.
Can I have more than one TFSA?
You can open more than one TFSA but the annual contribution limit (or more if you have unused contribution room from previous years) will apply to all your TFSAs combined.
Contributions
What is the annual limit for contributing to a TFSA?
The maximum contribution for 2013 is $5,500. In subsequent years, the contribution limit will be indexed according to the inflation rate (rounded to the nearest $500).
Are TFSA contributions tax-deductible?
No. Contributions to a TFSA are not tax-deductible but the income generated in a TFSA and the withdrawals made from a TFSA are not subject to income tax.
Does my income affect my TFSA contribution limit?
No. Any Canadian resident aged 18 or over can contribute yearly to a TFSA regardless of their income level.
What happens if my contributions exceed the maximum allowed?
Contributions that exceed your contribution room are subject to a penalty of 1% per month.
How will I be informed if I reach my contribution limit?
After you submit your income tax return, the Canada Revenue Agency (CRA) will inform you of your remaining contribution room.
Will the annual contribution limit remain the same in future years?
Every year, the limit will be indexed according to the Consumer Price Index (rounded to the nearest $500).
Can my unused contribution room be carried forward to subsequent years?
Yes. Unused contribution room will be automatically carried forward to subsequent years.
For example, if you contribute $2,000 to a TFSA in 2009 and $3,000 in 2010, your contribution room for 2011 will be $10,000 because you would carry forward $3,000 from 2009 and $2,000 from 2010 and add your contribution room for 2011 ($3,000 + $2,000 + $5,000)
Is there a cumulative limit for unused contribution room?
No. Unused contribution room will be carried forward automatically to subsequent years.
Can I borrow to make my TFSA contribution?
Yes. However, the interest you pay on the funds borrowed is not deductible for income tax purposes.
Income
Is the investment income earned within my TFSA taxable?
No. TFSA investment income is not taxable and does not affect income-tested government benefits or tax credits.
Will my TFSA investment income affect my eligibility for income-tested government benefits and tax credits?
No. The income you earn in your TFSA, and the withdrawals you make from your TFSA, will not affect your eligibility for government benefits or tax credits.
Withdrawals
When can I make withdrawals from my TFSA?
You can withdraw funds from your TFSA whenever you want, as long as you adhere to the terms and conditions of the investments you selected.
Is there a maximum withdrawal limit?
No. There is no limit on the amounts you can withdraw or the number of withdrawals.
Are withdrawals from a TFSA taxable?
No. The amounts withdrawn from a TFSA are not subject to income tax.
Can I redeposit the amounts I withdraw from my TFSA?
Yes. However, withdrawn amounts cannot be redeposited until the following year (or later).
Can I withdraw amounts for personal reasons?
There are no restrictions on the reasons for your withdrawals. For example, you can use the funds in your TFSA to buy your first home, travel around the world or cover unforeseen expenses.
Are there any withdrawal fees?
No. Fees would apply only for a transfer between National Bank and another institution.
Investments
Which types of products can be invested in a TFSA?
The investment products that are eligible for a TFSA are essentially the same as those that are eligible for an RRSP.

At National Bank, you can invest the following products in your TFSA:
• Guaranteed Investment Certificates (GICs) with fixed or variable rates
• National Bank Mutual Funds1
• Investments eligible for a Self-Directed TFSA

1 National Bank Mutual Funds (the "Funds") are offered by National Bank Securities Inc., a wholly owned subsidiary of National Bank of Canada. Commissions, trailing commissions, management fees and expenses all may be associated with investments in the Funds. Please read the prospectus of the Funds before investing. The Funds are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer. There can be no assurances that money market funds will be able to maintain their net asset value per security at a constant amount or that the full amount of your investment in the Funds will be returned to you. The Funds are not guaranteed, their values change frequently and past performance may not be repeated.

Differences between a TFSA, an RRSP and a non-registered account
Why is the TFSA often compared to an RRSP?
TFSAs and RRSPs have many similar features. For example, the income generated by the investments within the plan or account is not subject to income tax.

However, the TFSA does not replace an RRSP. Instead, a TFSA and an RRSP are complementary parts of an optimum retirement strategy.
How is the TFSA different from an RRSP?
Here are the main differences:

TFSA RRSP
Minimum age 18 None
Maximum age None 71
Annual contribution limit $5,000 (2011)
$5,000 (2012)
$5,500 (2013)
$22,450 (2011)
$22,970 (2012)
$23,820 (2013)
Tax deductible contributions
TFSA contributions cannot be deducted from your income.
Impact on eligibility for government programs (OAS, GIS, etc.)
Withdrawals are not included in the calculation of the clawback for government programs.
In other words, regardless of the amount you withdraw from your TFSA, you will be eligible for the same benefits.

Withdrawals are included in the calculation of the clawback for government programs.
How is the TFSA different from a non-registered savings account?
The income generated by the investments within a TFSA is not subject to income tax. In contrast, the income generated in a non-registered savings account is subject to income tax.
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Spousal contributions
Can I contribute to my spouse’s TFSA?
You cannot contribute to your spouse’s TFSA but you can transfer funds to your spouse so that he/she can make his/her own contribution. The income generated by those funds in your spouse’s TFSA will not be subject to income attribution rules*.

*Attribution rules are income tax provisions that apply to an individual who transfers assets to a third party. Under those rules, the income earned on the transferred assets has to be included in the individual’s income.