TFSA Tips

CRA has a new Tax Tip page with information on Tax Free Savings Accounts. It clarifies the type of investments that can be held and how TFSA contribution room is calculated. It also explains that contribution room freed up by withdrawing from a TFSA account is not restored until the beginning of the next tax year.

The difference between a transfer and a withdrawal is highlighted as well. TFSA over-contributions are based upon the total contributed each year and not on the balance of all TFSA holdings at the end of the year. So, multiple withdrawals and re-contributions could put a taxpayer over their limit even though the balance does not change! A tax of 1% per month on the highest excess TFSA amount will be charged until the extra contributions are withdrawn.

For more information:

http://www.cra-arc.gc.ca/nwsrm/txtps/2011/tt110111-eng.html?=eml20110111