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Tax-free savings accounts (TFSAs) -> Withdrawals

 

TFSA Withdrawals

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Withdrawals will create additional contribution room equal to the amount of the withdrawal, for deposits in future years (not in the year of the withdrawal).

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Income earned in  and withdrawals from a TFSA will not affect eligibility for federal income-tested benefits and credits such as
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guaranteed income supplement (GIS)

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old age security (OAS)

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age exemption tax credit

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Any fees paid related to the TFSA will not be tax-deductible.

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In kind withdrawals can be made, with the investments being transferred to a non-registered account, or as a contribution to an RRSP, subject to available RRSP contribution room.

If the maximum has been contributed to a TFSA, and then a withdrawal is made, no further amount can be contributed (without penalty) until the following year.  On January 1st of the following year, the withdrawal amount from the previous year will be used to increase your regular annual contribution room.

October 16, 2009 proposed amendments to the Income Tax Act will include rules to ensure that any withdrawals of amounts regarding deliberate overcontributions, prohibited investments, non-qualified investments, asset transfer transactions and income related to those amounts do not constitute withdrawals for TFSA purposes, and do not create additional TFSA contribution room.

Department of Finance information
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October 16, 2009 proposal re technical changes to TFSAs

Tax Tip:  Unless you are retired, you are usually better to withdraw money from a TFSA instead of an RRSP.

Previous:
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What is better - TFSA or RRSP?

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TFSA contributions

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Unused contribution room

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TFSA investments - qualified, non-qualified, and prohibited

Next:
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Asset transfer (swap) transactions

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Taxes payable re TFSA

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Marital breakdown

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Death of the TFSA holder

Back to TFSA main page.

 

Revised: October 31, 2009

 

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