Tax Tip Thursday

Savings Account Help

Lately I have been getting a lot of questions about different types of savings accounts, like TFSAs, FHSAs, and RRSPs.

Pop Quiz!

  1. Do my TFSA contributions impact this year’s taxes?
    1. Nope! The money you put into your TFSA does not reduce your taxes owed for that particular year. The big benefit of a TFSA comes when it’s time to withdraw your money. No matter how much your investments have grown, you pay zero taxes when you withdraw them. That can add up to quite a bit of savings.
  2. How many times can I withdraw from and contribute to my TFSA?
    1. As many times as you like, as long as you are within your contribution room. But remember: when you withdraw from your TFSA, you don’t get that contribution room back until January 1 of the following calendar year.
  3. If I contribute $20,000 to my TFSA and make a profit of $10,000 from investing that money in stocks, can I withdraw $30,000 without any tax implications?
    1. Growth within a TFSA is tax-free, so you can make that withdrawal without paying taxes.
  4. Follow-up question from #3 — what’s my new contribution room after that $30,000 withdrawal?
    1. On January 1 of the following year, the $30,000 will be added to your contribution room (along with your new contribution room for the new year).
  5. Is it a good idea to sell my non-registered investments to take advantage of the extra contribution room of my spouse’s TFSA?
    1. It depends on a lot of things, including how much capital gains you’d be taxed on when you sold those investments and your overall investing timeline. Sometimes it would make sense, and sometimes it would not. Your best bet is to contact The Mad Accountant.
  6. My spouse has no income. Should I be putting money in their TFSA?
    1. You can gift money to your spouse to contribute to their own TFSA — without affecting your contribution room or your taxes.
  7. Can I transfer funds from my RRSP into my TFSA?
    1. You can, but it’s not always the smartest move. You’d need to pay taxes on the funds withdrawn, and you would lose that RRSP contribution room. There could be other options available to reach your goal that are more tax-efficient. Check with The Mad Accountant first.

Looking to manage your savings?

It can be tough to find the best way to manage your savings, and the best person to ask for help is your accountant. Book an appointment today!

Disclaimer:

This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal or tax advice nor can it or should it be relied upon. All tax situations are specific to each individual. If you have specific tax questions you should book an appointment for a 1 on 1 consultation.