TFSAs and Tax: What You Need To Know
TFSAs and Tax: What You Need To Know
Tax season in Canada can be stressful, especially if you are ill-prepared for it. There are many ways you can make the most out of your taxes each year; however, many Canadians are unaware of these strategies.
Tax-Free Savings Accounts, for example, are incredibly valuable to Canadians who regularly put aside their money. While the contributions made to a TFSA are not deducted from one's income to reduce the amount of tax one owes, having a TFSA does offer other tax advantages that could help you keep more of your hard-earned income—and grow it too.
The biggest advantage of having a TFSA is that no taxes are applied on any investment income that is earned within the account, including interest, dividends, or capital gains. This means that all the money you earn from the investment vehicles that are tied to your savings within a TFSA pretty much remains as-is, with no losses to tax. Additionally, withdrawals from the account are also non-taxable and are not considered with your total income.
If you already own shares but they are not in a TFSA yet, you can actually deposit them into one via a transfer method called an "in-kind" contribution. In-kind contributions save you the trouble of having to sell your shares in order to deposit the corresponding money into your TFSA. In order to do this, you will have to open a TFSA at a bank and provide them with the necessary share certificates. The contribution amount will be based on the fair market value of the shares on the day the deposit is made.
Once your shares are in a TFSA, the cash from the dividends will be directly deposited into the TFSA rather than sent to you via mail. You will also no longer receive a year T5 tax slip, which indicates your dividend earnings as well as the amount you have to declare on your income tax return, saving you from having to do that extra step every tax season.
The one "catch" to this is that you will have to report any capital gains on your income tax return in the year that you made the in-kind contribution; though any future gains your shares make while in your TFSA will never be taxable. Also, it is important to remember that the annual TFSA contribution limit for 2022 is $6,000, and unused contribution room can be carried forward to future years, so if you've never maxed out your TFSA contribution room, you will have a lot to work with!
Source
READ MORE
You step outside to enjoy some fresh air, maybe sip your coffee, and then you notice it—a small, dark lens pointed right at your yard. Your neighbor just installed security cameras, and suddenly your private space doesn’t feel so private anymore. It’s an uncomfortable situation, and figuring out where you stand isn’t always straightforward.
You paid the debt. You closed the loop. Maybe you even felt that rare, glorious moment of financial relief. And then—bam—it’s still sitting on your credit report like nothing ever happened.
Credit reports aren’t always perfectly up to date, and sometimes things fall through the cracks. The trick is knowing what’s normal, what’s wrong, and what to do next.
Inheriting a house leaves you with the choice: keep it separate in your name, or commingle it with your spouse?
My kids keep kicking their ball over our elderly neighbor’s wall, and he refuses to give it back. Here is how to handle the dispute calmly, protect neighbor relations, and stop it from happening again.
Won a $500,000 lottery prize from a ticket your spouse bought, and now divorce is on the table? Here’s how courts may look at lottery winnings, marital property, and who might really own the money.
My boss hired his brother and now I am being demoted so he can take my role. Is that legal? Here is what workers need to know about nepotism, demotions, discrimination, retaliation, and employment rights.
Disclaimer
The information on MoneyMade.com is intended to support financial literacy and should not be considered tax or legal advice. It is not meant to serve as a forecast, research report, or investment recommendation, nor should it be taken as an offer or solicitation to buy or sell any securities or adopt any particular investment strategy. All financial, tax, and legal decisions should be made with the help of a qualified professional. We do not guarantee the accuracy, timeliness, or outcomes associated with the use of this content.
Dear reader,
It’s true what they say: money makes the world go round. In order to succeed in this life, you need to have a good grasp of key financial concepts. That’s where Moneymade comes in. Our mission is to provide you with the best financial advice and information to help you navigate this ever-changing world. Sometimes, generating wealth just requires common sense. Don’t max out your credit card if you can’t afford the interest payments. Don’t overspend on Christmas shopping. When ordering gifts on Amazon, make sure you factor in taxes and shipping costs. If you need a new car, consider a model that’s easy to repair instead of an expensive BMW or Mercedes. Sometimes you dream vacation to Hawaii or the Bahamas just isn’t in the budget, but there may be more affordable all-inclusive hotels if you know where to look.
Looking for a new home? Make sure you get a mortgage rate that works for you. That means understanding the difference between fixed and variable interest rates. Whether you’re looking to learn how to make money, save money, or invest your money, our well-researched and insightful content will set you on the path to financial success. Passionate about mortgage rates, real estate, investing, saving, or anything money-related? Looking to learn how to generate wealth? Improve your life today with Moneymade. If you have any feedback for the MoneyMade team, please reach out to [email protected]. Thanks for your help!
Warmest regards,
The Moneymade team
