Reach your savings goals faster with a tax-free savings account (TFSA)
Enjoy tax-free growth
The Federal Government introduced Tax-Free Savings Accounts (TFSAs) in 2009 to encourage Canadians to save by making the investment income and capital gains earned in TFSAs exempt from personal income tax.
As of 2016, you can contribute:
- Up to $5,500 per year (previous annual limits were $5,000 for 2009 to 2012, $5,500 for 2013 to 2014, and $10,000 for 2015) to a TFSA without paying tax on the income you earn. Withdrawals are also tax-free.*
For most Canadians, TFSAs are a great way to save. Your money grows faster because income and capital gains are tax-free.* Plus, they encourage you to start saving early to meet the demands of the future without having to worry about taxes on your earnings and withdrawals.
See how the tax benefits of a TFSA help your savings grow faster than if they were in a non-registered account:
Withdraw without penalties
You can take money out of your TFSA whenever you like, for whatever you like, with no taxes. The amount you withdraw can be placed back at the start of the following year.1
Carry over your unused annual contribution amounts
As of 2016, you can contribute:
- Up to $5,500 per year (previous annual limits were $5,000 for 2009 to 2012, $5,500 for 2013 to 2014, and $10,000 for 2015), plus
- Any unused contribution room from previous years, plus
- The amount of any withdrawals made in previous years.
Annual maximums apply to all TFSAs you hold at all financial institutions and excess contributions are subject to tax, interest and penalties.*
The Canada Revenue Agency (CRA) will track your contribution room. The CRA reports this amount to individuals through the “My Account” function on the CRA web site (www.cra.gc.ca/myaccount).
Other benefits of a TFSA
- If you're married, you can, in some cases, provide funds to your spouse for him or her to contribute to a TFSA without negative tax implications while the funds remain in your spouse’s TFSA.
- If you're a senior, TFSAs can be a good post-retirement tax shelter.
- Also, income earned within TFSAs doesn't impact eligibility for Old Age Security benefits or the Guaranteed Income Supplement
TFSA, RRSP or both?
Depending on your circumstances and what you're saving for, it usually makes sense to have both:
- Money you put into an RRSP is tax deductible and grows in a tax deferred manner. You pay tax on any money you take out
- Money you put into a TFSA isn't tax deductible but grows tax-free. You do not pay tax on any money you take out*
- A TFSA is a great alternative savings vehicle when you've maximized your RRSP contributions
- Unlike an RRSP or RESP, a TFSA is designed to help you save for any financial goal at any point in the future – a car, home renovations, starting a new business, or just a rainy day
TFSAs tend to be better suited for saving for a major purchase, while RRSPs are designed to help you save for retirement.
- Your TFSA contribution room for a year includes:
- the TFSA dollar limit for the year in question;
- unused TFSA contribution room from prior years; and
- withdrawals from TFSAs made in prior years.
- Your contributions should not exceed your TFSA contribution room for a year
- The maximum annual contribution applies to all of your TFSAs held with HSBC or any other financial institution
- Excess contributions to your TFSA are subject to taxes, interest and penalties
- Provided that contribution limits are not exceeded and contributions are made while the account holder is a resident of Canada, income earned in a TFSA is generally not subject to Canadian taxes. Taxes of other countries may apply
- Only Canadian residents who are the age of majority in their province of residence and have a valid Social Insurance Number can contribute to a TFSA
- Unlike an RRSP, any money you contribute to a TFSA will not be tax-deductible
Consult your tax advisor for full details about TFSAs and how they relate to your tax situation.
While the funds are in the TFSA
- Any income or capital gains earned in the TFSA will not be taxed.*
- Most investments that can currently be held in an RRSP will also be allowable in a TFSA. Eligible investments may include certain savings accounts, GICs, mutual funds, stocks and bonds.
- Generally, any funds you transfer FROM your TFSA could be considered withdrawals and any funds transferred to your TFSA could be considered contributions.
Explore your TFSA options at HSBC
The content herein is not intended to provide specific tax advice and should not be relied upon in this regard. Please consult your tax advisor to find out which strategies suit your tax situation. HSBC Bank Canada makes no guarantee, representation, or warranty and accepts no responsibility or liability as to the tax treatment of these services.
*Income earned in a TFSA is not subject to Canadian taxes. Taxes of other countries may apply. Contributions to Tax-Free Savings Accounts (TFSAs) are limited annually. Generally, the maximum contribution room for a year is equal to the total of unused contribution room from the previous year, distributions made in the previous year and the TSFA dollar limit for the year. The maximum annual contribution applies to all of your TFSAs held with HSBC Bank Canada or any other financial institution. Only Canadian residents, who are over 18 years of age and have a valid Social Insurance Number, can make contributions to a TFSA. The age of majority is 19 for residents of Newfoundland & 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. Consult your tax advisor for full details about TFSAs and how they relate to your tax situation.
Personal customers only.
1Re-contribution of money withdrawn from a TFSA may be subject to rules and annual limits. Consult with your personal tax advisor.
2Rates are subject to change without notice
3Interest is only paid on balances up to $1,000,000 in the currency of the Account.
4Including Telephone Banking and Personal Internet Banking withdrawals, Interac®2 Direct Payments, ATM withdrawals/transfers out and pre-authorized/electronic debits. Fee does not apply to transfers from a High Rate Savings Account to another HSBC Bank Canada account in the same name. Interac®2 Direct Payments, ATM withdrawals/transfers out and pre-authorized debits not available for Foreign Currency High Rate Savings accounts and Foreign Currency Savings Accounts.
5Some banks charge an additional fee to use their ATMs
®1THE EXCHANGE is a registered trademark owned by Fiserv Inc., licensed for use in Canada by FICANEX Services Limited Partnership.
®2Trademark of Interac Inc. HSBC Bank Canada authorized user of the trademark.