Investment income, including capital gains and dividends, earned in a TFSA is not taxed in most cases, even when withdrawn.
[2] This measure was supported by the C. D. Howe Institute, which stated; "This tax policy gem is very good news for Canadians, and Mr. Flaherty and his government deserve credit for a novel program".
A TFSA is an account in which Canadian residents 18 years and older with a valid SIN can save or invest.
[9] The 2015 federal budget raised the contribution limit to $10,000, and eliminated indexation for inflation, beginning with the 2015 tax year.
[15] Any unused contribution room under the cap can be carried forward to subsequent years, without any upward limit.
[16] A TFSA can hold any investments that are RRSP-eligible, including publicly traded shares on eligible exchanges, eligible shares of private corporations, certain debt obligations, instalment receipts, money denominated in any currency, trust interests including mutual funds and real estate investment trusts, annuity contracts, warrants, rights and options, registered investments, royalty units, partnership units, and depository receipts.
Creditor protection may only be applied to assets within a TFSA if they are held in a segregated fund with an insurance company.
Contributors are responsible for tracking their own contributions to ensure they don't exceed applicable limits, as discussed in the next section.
[20] In the 2012 tax year, the CRA sent notices to about 74,000 taxpayers about TFSA over-contributions, out of about nine million TFSAs existing at the end of 2012.
[21] Unlike an RRSP, a TFSA is not considered by the United States Internal Revenue Service to be a pension plan.
PFICs can be very disadvantageous as, absent certain elections, "excess" distributions are always taxed at the highest marginal rate.
[30] Unlike an RRSP, which must be converted to a registered retirement income fund (RRIF) when the holder turns 71, a TFSA does not expire.