Monday, January 5, 2009

Tax Free Savings account

I noticed that the Tax Free Savings Account I opened with ING, is now officially a TFSA. I topped it up to exactly $5000 this weekend. I also did a quick browse on the CRA website to inform myself of the rules and penalties. You can read up on it here.

Here are some parts I took note of.

Don't over contribute. If you do, the excess will be subjected to a tax of 1% per month, for each month the excess remains in the account.

You can withdraw at any time for any reason. And withdrawals will be added back to your TFSA contribution room at the beginning of the following year. So if you take out $1000, this year, next year you can contribute $6000.

The types of investments allowed for a TFSA are similar to those for RRSP. Thing like Mutual funds, stocks, GICs, bonds etc.

I put all my in ING high interest account. When allocating investments mutual funds, equity, GIC etc. it makes sense to have those investments will pays interest in a tax sheltered account. Interest is taxed at 100%, where as capital gains is not. Also, with a high interest savings account, my money is not locked in like GIC so I could use this TFSA as an emergency fund.

Anyway if anyone is interested in opening up an ING account, considering using my Orange Key 14795960S1 (also up on the side bar). By opening an account with $100 or more both the new account holder and referrer get a $13 bonus :)


Anonymous said...

Thank you for being a trail blazer and opening up an account so quickly and informing others. The bonus $13 is a nice touch for those people opening up an account anyway.