The Canadian Federal Government agrees that it’s important for all Canadians to save. And better still, they’ve just passed legislation to let you save without paying tax on the interest you earn. This means that soon all Canadians will be able to save up to $5,000 every year without being taxed on interest earned. This is great news for us savers!
Starting in 2009, Canadians aged 18 and older can contribute up to $5,000 annually (from their taxable income) to a TFSA (tax free savings account). The investment income, including capital gains, earned in a TFSA will not be taxed – even when withdrawn. The plan also allows an investor to withdraw funds from the TFSA at any time and for any purpose. The withdrawal amount can then be put back at a later date without reducing contribution room. Additionally, if an investor puts less than $5,000 into a TFSA in a given year, the unused room can be carried forward to future years.
Tax-Free Savings Accounts should be available at most major Canadian financial institutions once 2009 comes around. Stay tuned to this blog as I will be doing some research and will let you know which financial institutions offer high interest rate tax-free savings accounts.
See, another reason why Canada rocks!