6 myths about TFSAs: Why they’re more versatile than you think
Are you contributing to your tax-free savings account (TFSA)? Don’t let the myths around TFSAs hold you back.
Myth 1: TFSAs are for short-term goals.
Fact: Because they’re easy to withdraw from, Canadians often use TFSAs for short-term savings. But they are also powerful for longer-term goals, such as a down payment or retirement.
Myth 2: You can only contribute to your own TFSA.
Fact: You can give your spouse or adult children money to contribute to their own TFSA without having that amount, or any earnings from that amount being attributed back to you.
Myth 3: Use it or lose it.
Fact: If you don’t contribute to your TFSA in any year, you can carry forward your contribution room indefinitely. If you withdraw funds, your contribution room is restored the following calendar year.
Myth 4: Withdrawals from your TFSA count as income.
Fact: You can withdraw from your TFSA tax-free. The amount you withdraw won’t be considered taxable income.*
Myth 5: You can have only one TFSA.
Fact: You can have more than one TFSA, but the total amount you contribute is limited to your contribution room.
Myth 6: Your estte or beneficiary will have to pay tax on the assets when you pass away.
Fact: Assets within a TFSA will not be subject to taxation at death.
The MD Financial Suite offers a range of solutions to manage your TFSA. Whether you like to invest on your own or with an advisor, we have an option to help you achieve your goals, your way.
Find out how you could use your TFSA differently. Contact an MD Advisor.
*Withholding taxes by foreign governments may still apply. For example, the IRS levies a withholding tax on dividends from U.S. companies held by Canadian resident investors.
The information contained in this document is not intended to offer foreign or domestic taxation, legal, accounting or similar professional advice, nor is it intended to replace the advice of independent tax, accounting or legal professionals. Incorporation guidance is limited to asset allocation and integrating corporate entities into financial plans and wealth strategies. Any tax-related information is applicable to Canadian residents only and is in accordance with current Canadian tax law including judicial and administrative interpretation. The information and strategies presented here may not be suitable for U.S. persons (citizens, residents or green card holders) or non-residents of Canada, or for situations involving such individuals. Employees of the MD Group of Companies are not authorized to make any determination of a client’s U.S. status or tax filing obligations, whether foreign or domestic. The MD ExO® service provides financial products and guidance to clients, delivered through the MD Group of Companies (MD Financial Management Inc., MD Management Limited, MD Private Trust Company, MD Life Insurance Company and MD Insurance Agency Limited). For a detailed list of these companies, visit md.ca. MD Financial Management provides financial products and services, the MD Family of Funds and investment counselling services through the MD Group of Companies.