5 TFSA MythsThere are a number of TFSA myths that need to be cleared up. The Tax Free Savings Account is a financial breakthrough. As important-if not more so-- then the RRSP. The RRSP simply pushes your tax liability down the road. This is the only registered vehicle that allows you truly tax-free gains! It is a registered account where you can deposit grow and withdraw money completely tax free. Any that is eligible for an RRSP account is acceptable in a tax free savings account. It is destined to become the quintessential core element for savings in the next 20 years. Started in the (2009) Tax Year, because it is a registered account there are some misapprehensions, misunderstandings and confusion about them. We will clear 5 tfsa myth, right here today. 5 TFSA myths:
NOT TRUE -- Withdrawals will not cause claw-backs or reduce the benefits from other government programs like Old age security (OAS), guaranteed income supplement (GIS), and Canada Child Tax Benefits (CCTB) This is your money; no one can touch it (not even creditors if you use Segregated funds inside the account), withdrawals are 100% tax-free. NOT TRUE -- You can withdraw your funds at any time. There is no withholding tax because the withdrawals are NOT TAXABLE. This account is incredibly versatile. You can use the it for--retirement planning, an emergency account, a Christmas account, a vacation account,. What eve you wish. The only caveat is that you are limited $5,000 per year, per person deposits. When you choose to withdraw the money and spend it is entirely your decision alone. NOT TRUE -- You can use it as a savings account. However, that’s not the only way you can use it. It can hold: Stocks, bonds, mutual funds, segregated funds, precious metals, ETFs -- anything that is acceptable for an RRSP is eligible for this account. The difference is--NO TAX on the gains. Isn’t it nice to know you can actually keep 100% the money you’ve earned. NOT TRUE-- Any holdings eligible for an RRSP can be held inside these accounts. Even some dividends from foreign sources can be held in the account. This has the potential of making foreign dividends 100% tax free. You must be selective, when choosing foreign investments. (please note although not taxable by CRA foreign holdings in a TFSA can be subject to foreign government withholding Tax.) NOT TRUE-- It is, simply a tax sheltered account that allows you to deposit virtually anything type of investment you wish. Regardless how great the gain is it is only the deposit that is limited to $5,000 yearly! any and all withdrawals are TAX-free! Always consult a qualified financial professional to assist you with how use your TFSA to your best advantage.
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