Federal Budget 2008 - Tax Free Savings Account
The Government will unveil the single most important personal savings vehicle since the introduction of the RRSP: The Tax Free Savings Account.
This flexible, registered, general-purpose account will allow Canadians to watch their savings grow, tax-free.
It's the first account of its kind in Canadian history.
This is how it works:
First, Canadians can contribute up to $5,000 every year to a registered Tax-Free Savings Account, plus carry forward any unused room to future years.
Second, the investment income, including capital gains, earned in the plan will be exempt from any tax,even when withdrawn.
Third, Canadians can withdraw from the account at any time without restriction. Better yet, there are no restrictions on what they can save for.
Finally, the full amount of withdrawals may be re-contributed to their Tax-Free Savings Account in the future, to ensure no loss in a person's total savings room.
An RRSP is primarily designed for retirement. In many ways, a Tax-Free Savings Account is like an RRSP for everything else in your life.It is a powerful incentive to save:
- To help young people saving for their first car.
- To help couples saving for their first home.
- To help seniors stretch their retirement savings further.
- To help every Canadian set aside a bit of cash each month for a special project, to help their kids, or to simply treat themselves.
- To make it easier for lower- and modest-income Canadians to save, there will be no claw-backs. Neither the income or capital gains earned in a Tax-Free Savings Account nor the withdrawals from it will affect eligibility for federal income-tested benefits, such as the Guaranteed Income Supplement.
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