Taxes or no taxes: That’s the question

by Mauricio Dreher

Have you ever heard about the TFSA – Tax Free Savings Account?



The Government of Canada worried that during years Canadians were not saving as much as they used to, created then, back in 2009, the TFSA. Although it will not generate a tax deduction when you invest on it, by the time that you make any withdraw from this account, the growth you’ve got will be Tax Free, meaning that comparing the same investment as TFSA or Unregistered, your result will be higher on the first.

A TFSA improves savings incentives for individuals because neither the income earned in a TFSA nor withdrawals from it affect eligibility for federal income-tested benefits and credits, such as the Child Benefit, the GST credit, the Age Credit, Old Age Security and Guaranteed Income Supplement benefits.

How much can I invest in TFSA?

This year the maximum you may invest within a TFSA is $5,500 per individual that is 18 years old or older. If you have never invested in a TFSA, and depending on the year you became a resident and/or age 18, you might be able to invest up to $46,500. But don’t forget that your spouse also has this room, so the couple might be able to invest up to $93,000 in a totally tax-free investment, no matter how much money you make in it… Isn’t that great?

Death of a TFSA Holder

After the holder of a TFSA dies, possible tax implications may vary somewhat depending on one or more of the following factors, as applicable:
• the type of TFSA;
• the type of beneficiary(ies);
• whether any income was earned after the date of death; and
• how long, after the date of death, amounts are distributed to beneficiaries.

Depending on which combination of the above factors applies, the following can be affected:
• whether or not the deceased’s TFSA continues to exist or is considered to have ceased;
• how income earned after the date of death may be reported and taxed;
• whether a beneficiary can transfer amounts received to their own TFSA, within certain limits, and whether such a transfer would impact their unused TFSA contribution room.

Whether to invest in RRSP or TFSA, first you should ask your Financial Planner to analyse your financial situation to better support the decision.

If you’ve invested in RRSP, it triggered a deduction in your income taxes, so if you received a tax refund, why not save it in a TFSA until you decide? This way you’ll take advantage of both programs…

The statements contained herein are based on material intended for general information purposes only. Where such statements are based in whole or in part on information provided by third parties, they are not guaranteed to be accurate or complete. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice.


Mauricio Dreher

has more than 15 years experience in the financial industry, having an internationally recognized certification as Certified Financial Planner. He works with Canfin Financial Group, offering Investments, Insurances, Mortgages, with emphasis in Tax Savings Strategies. Bus: (877) 422-6346 ext. 528 or Cell: (416) 876-3644.

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