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Tax Free Savings Account (TFSA)


There are many advantages to investing in a tax free savings account; the main advantage being that you can save your money tax-free. This money can be withdrawn at any time without being taxed, and it is not considered income earned for the year either.

There is a contribution limit of $5,500 each year but any unused contribution room from previous years is carried over to the following years. Also, any amount withdrawn is added to your contribution room in the following years.

Eligibility:
- Must be a Canadian resident
- Must be 18 years of age or older
- Must have a Social Insurance Number (SIN)

TFSA vs RRSP





Tax deduction for contributions

Tax-free withdrawals

Tax-free growth

Annual contribution limit


Need earned income to contribute

Carry-forward of unused contribution room 

Contribution room restored after withdrawal

Minimum age for contribution

Maturity limit

Penalty for over-contributions

Spousal contributions

Impact on government benefits such as OAS and GIS

TFSA

No   

Yes

Yes

$5,500


No

Yes

Yes

Age 18

None

1% per month

Not subject to income attribution rules

No

RRSP

Yes

No

Tax deferred until withdrawn

18% of earned income up to an annual maximum (determined annually)

Yes

Yes

No

None

Age 71

1% per month

Income attribution rules apply

Yes
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