Questions and answers

 
General
Who is eligible to open a TFSA?
Why would I invest with the Sun Life Financial group plan, rather than a bank?
If I borrow money to invest in a TFSA, is the interest tax-deductible?
How is the TFSA different from an RRSP?
Upon death, are the funds in my TFSA now taxable?
What happens to my TFSA if there is a breakdown of marriage or common-law partnership?
Are income-tested benefits affected?
Can I hold multiple TFSAs with multiple issuers?

Contribute
How can I contribute?
How much can I contribute?
What happens if I do not contribute the full amount each year?
 Should I open a TFSA even if I don’t intend to contribute to it right away, to ensure I am credited 

with contribution room by CRA?
Will I have a record of my contribution limit?
What happens if I contribute more than my limit in a year?
How will I know if I over-contribute?

Withdrawals
Can I withdraw the money I contributed at any time, for any purpose?
Do I pay any income tax on withdrawals?
Do withdrawals affect my taxable income?
Can I re-contribute my withdrawal at a later date?

 

General 

Who is eligible to open a TFSA?
Any individual who is resident in Canada and who is aged 18 or over.

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Why would I invest with the Sun Life Financial group plan, rather than a bank?
There are a few key potential advantages to members to join a group TFSA vs contributing at a bank:

  • the convenience of contributing via payroll deduction (if applicable);
  • access to institutional investments; and
  • low investment management fees compared to retail rates.

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If I borrow money to invest in a TFSA, is the interest tax-deductible?
No, interest on money borrowed is not deductible for tax purposes.

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How is the TFSA different from an RRSP?

  • Contributions are not tax-deductible
  • Withdrawals are tax-free and do not result in lost contribution room
  • You do not need to have earned income in order to contribute
  • There is no requirement at any age to convert your plan to an income payment option,
    such as a Registered Retirement Income Fund (RRIF).

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Upon death, are the funds in my TFSA now taxable?
Upon your death, the TFSA's tax-free status will end and any investment income or 
interest earned after the date of your death will be taxable to the beneficiary. This tax 
will be due the end of the calendar year following the year of death.

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What happens to my TFSA if there is a breakdown of marriage or 
common-law partnership?
The assets in your TFSA may be transferred between spouses or common-law partners 
if there is a breakdown in a marriage or common-law partnership. This transfer will not 
create contribution room for the transferring spouse nor will it reduce contribution room 
for the receiving spouse.

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Are income-tested benefits affected?
No. Income earned in a TFSA and withdrawals from it will not impact benefits such as 
the Old Age Security, the Guaranteed Income Supplement, the Age Credit, the GST Credit, 
and the Canada Child Tax Benefit.

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Can I hold multiple TFSAs with multiple issuers?
Yes, for example, you may hold both a group and individual TFSA. However, the 
$5,000 annual contribution limit applies overall.

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Contributions 

How can I contribute? 
You can contribute through payroll deduction (if applicable) and/or lump sum payments.

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How much can I contribute?
You can contribute up to $10,000 per year.

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What happens if I do not contribute the full amount each year?
If you are not able to contribute in any given year your unused contribution room 
can be carried forward indefinitely. There is no limit on how much contribution room you 
can accumulate.

Example: Assume Mike (age 48) was not able to make a contribution to the TFSA 

until 2011, the year when he receives a small inheritance. He could make a contribution 
of $15,000 in that year.

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Should I open a TFSA even if I don’t intend to contribute to it right away, to ensure 
I am credited with contribution room by CRA?
This is not necessary. Canadians will automatically be credited the room on their 

Notice of Assessment provided they are at least 18 years of age beginning in 2009 and 
have a Social Insurance Number. When they are ready to start contributing, they will have 
the accumulated room from their Notice of Assessment available to them.

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Will I have a record of my contribution limit?
The CRA will determine the contribution room for each eligible member who files a 
T1 individual income tax return. The member’s contribution room will be reported in 
a new section on their annual Notice of Assessment – the first one being received 
in spring 2010 for the 2009 taxation year.

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What happens if I contribute more than my limit in a year?
If you over-contribute, similar to an RRSP, a penalty of 1% per month will be assessed 
by the Canada Revenue Agency on the amount that is over your accumulated 
contribution room.

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How will I know if I over-contribute?
The government will monitor total TFSA contributions and will confirm unused room and 
limits on a yearly basis – much like the notification now happens for RRSP contributions 
- on your Notice of Assessment and through the 'My Account' on the CRA website.

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Withdrawals 

Can I withdraw the money I contributed at any time, for any purpose?
Money can be taken out of your TFSA at any time and for whatever purpose you need it 
for. There are no restrictions on how much you can withdraw. A withdrawal fee may apply.

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Do I pay any income tax on withdrawals?
No, withdrawals are made tax-free.

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Do withdrawals affect my taxable income?
No, since withdrawals are not considered taxable income they are not reported as 
income in your taxes.

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Can I re-contribute my withdrawal at a later date?
Any withdrawal amounts made in the current calendar year will be added to your 
unused contribution room for the following year.

Example: If Mike withdrew $20,000 in 2013 (including investment earnings) from his 

TFSA, he could re-contribute the $20,000 to the TFSA when he has available funds 
anytime in 2014 or later, and then continue to earn tax-free investment income. If he 
has other available unused TFSA room in 2013, he could put some money back into 
the TFSA in that year without waiting until 2014.

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