Tax-Free Savings Account (TFSA) Basics

The 2009 contribution limit is $5,000. This annual limit will rise along with inflation in future years, in $500 increments.

In addition, you can carry forward unused contribution room indefinitely. The federal government will report your TFSA contribution room to you annually.

Any Canadian resident age 18 or older with a Social Insurance Number can open a Tax-Free Savings Account.

Note: The age of majority is 19 for residents of Newfoundland and Labrador, New Brunswick, Nova Scotia, British Columbia, Northwest Territories, Yukon and Nunavut, which may delay the opening of a TFSA. However, the accumulation of contribution room will start at age 18.

You are not required to have earned income to contribute to a Tax-Free Savings Account.

There is no tax deduction for contributing to a TFSA. However, the returns your investments generate (interest, dividends or capital gains) are not taxable (except for any foreign tax on foreign investments).

In addition, your withdrawals are tax-free.

You can withdraw money from your account at any time, (depending on what you invested in). At RBC^®, we will not charge you a TFSA withdrawal fee.

In addition, you can re-contribute the amounts you withdrew anytime after the year of withdrawal.

For example:

Jan 2009: You contribute $5,000

July 2009: You withdraw $2,000

2010 TFSA allowable contribution = $7,000 ( $5,000 annual allowable + $2,000 re-contribution)

You can invest in RBC Savings Deposits, RBC GICs and RBC Funds through RBC Royal Bank. You can always make regular automatic contributions with an RBC TFSA-Matic™.

You can also invest in stocks and bonds through RBC Direct Investing™ and RBC Dominion Securities.