TAXATION Additional Tax Savings through the TFSA

MONEYSAVER Debit Card Fraud

TECHNOLOGY Recording Travel for Business

MANAGEMENT When Cash is Short

Taxation

Additional Tax Savings through the TFSA

A Tax Free Savings Account (TFSA) can be used together with your RRSP or RRIF to shelter more investment income from tax.

As you prepare to file your 2010 personal income tax, you may ask: Is there another means of reducing tax on income other than the RRSP?

TFSAs and RRSPs

The answer, of course, is a resounding “YES.” It is the Tax Free Savings Account (TFSA). When you contribute to an RRSP you get a deduction that relates to your “earned income” in the preceding year and a tax reduction based on the applicable tax rate. If you start withdrawing RRSP funds, however, they are taxed at your tax rate in the year of withdrawal. Contributions to the TFSA, on the other hand, are not tax deductible and do not, therefore, create an instant tax savings as does the RRSP contribution. The TFSA does, however, offer the opportunity to those who have already contributed their annual limit to their RRSP to set aside an additional amount and shelter any investment income (capital gains, interest and dividends) earned on those funds. Withdrawals are tax free. As with RRSPs, losses in a TFSA are not tax deductible. No capital gains tax is paid at the death of the account holder. Unlike RRSPs, the property in a TFSA can be used to secure a loan. Continue reading “February 2011 Business Matters Newsletter” »