Have you considered the new TFSA for your personal or business financial goals? Starting in 2009, Canadians will have the option to invest capital into the tax 9A0-144free savings accounts (TFSAs) in addition to or instead of the more well known, RRSP accounts. Each type of investment vehicle offers features and benefits that should be considered by each investor prior to an investment decision being made. So, be sure to carefully examine both investment types before making an investment decision.
One of the biggest differences between the RRSP and the TFSA accounts is that the RRSP was specifically designed for retirement, while the TFSA is flexible and can be utilized for virtually any financial goal or objective. So, investors of any age can save towards purchasing a new car, a new home, their next vacation, their children's education and even retirement using the new TFSA account.
Another key difference between the RRSP and the TFSA accounts is that the contributions into a RRSP are tax deductible, while the contributions into the TFSA account are made on an after tax basis. Due to the tax status of the contributions into these accounts, the withdrawal of funds is also treated differently. When an individual withdrawals money from a RRSP account, the funds are fully taxable at the individual's tax rate. But, when an individual withdrawals funds from a TFSA account, the money is completely tax free.
In addition to the investment purpose and tax treatment differences between the RRSP and the TFSA accounts, there are also a variety of other differences that should be considered when making an investment decision. Some of these account differences include:
Income Requirements
Funds that are contributed into an RRSP account on an annual basis are determined by the amount of total annual income received in the same year per person. Unlike the RRSP, the TFSA account does not have an income 9A0-142requirement, meaning that anyone can contribute up to the maximum amount per year as long as they are of eligible investment age.
Withdrawals- Minimum Age Requirements
Withdrawals are mandatory beginning at age 71 from RRSP accounts. But, unlike the RRSP accounts, there are not mandatory withdrawal requirements at any age for funds invested inside TFSA accounts.
Re-Contributions
When an account owner makes a withdrawal from an RRSP account, they are not able to reinvest funds back into the account in the future unless the contributions are for the current tax year and are based upon current income. TFSAs offer investors the ability to reinvest funds back into the account up to the maximum amount per year. So, investors have the ability to reuse the tax free account again and again for any investment goal desired9A0-064.
Allowable Contributions
Starting in 2009, eligible investors can contribute $5,000 per year into a TFSA. Married couples are eligible to contribute a total of $10,000 per year. These quantities will increase on an annual basis. Eligible investors can contribute the lesser of $19,000 or 18% of earned income within each given tax year.
Post a Comment