The 2008 Budget introduced the Tax-Free Savings Account (TFSA), effective for 2009. The TFSA will allow Canadian resident individuals to earn investment income, including interest, dividends, and capital gains, on a tax-free basis. Contributions to the TFSA will not be deductible, but the income in the account will not be subject to tax, either while in the account or upon withdrawal.

The annual contribution limit for a TFSA will be $5,000 and will be increased annually to inflation, and rounded to the nearest $500. Unused TFSA room can be carried forward indefinitely. In addition, withdrawals from the account will free up more TFSA room. Excess contributions will be subject to a 1% tax per month. Qualified investments will be similar to those of an RRSP.

Interest on borrowed money used to invest in a TFSA will not be deductible, as is currently the case for borrowings used to invest in other tax-sheltered accounts, such as an RRSP. However, the assets in the TFSA can be used as collateral for a loan of the individual.

One of the relative advantages of the TFSA (especially compared to an RRSP) is that withdrawals from the TFSA will not be included in income for the purpose of determining eligibility for various income-based credits and benefits, including the Age Credit and OAS benefits. In other words, unlike withdrawals from an RRSP or RRIF, which can effectively create an additional “tax” by reducing the individual's Age Credit or by clawing back OAS benefits (and certain other credits and benefits), withdrawals from the TFSA will have no effect on such credits or benefits.

Furthermore, unlike an RRSP, there is no time limit at which the TFSA must be wound up or converted into another investment vehicle. Thus, the TFSA can be used to fund pre-retirement years or post-retirement years, and there are no limits on either withdrawals or the use of the withdrawn funds.

The attribution rules will not apply to income earned in a TFSA. Therefore, one spouse can contribute to another spouse's TFSA and the investment income remains tax exempt and not subject to attribution.

Upon death, the value of the TFSA is not included in income (unlike an RRSP or RRIF), although any income that accrues after death will be subject to tax. To retain the tax-free status of the account, it may pass to the deceased's spouse or common-law partner, or the assets of the account can be transferred to a TFSA of the spouse or common-law partner.


The HRTC is a time-limited, non-refundable tax credit of up to $1,350 that can be claimed for eligible expenditures made for renovations and alterations of an enduring nature made to a dwelling eligible to be a principal residence which may include a house, condominium, cottage, and the land that forms part of it. Canadian homeowners who are thinking about renovating their kitchen, replacing their furnace or installing new windows or a new fence, for example, could really benefit from this credit. The HRTC can be claimed on the 2009 income tax and benefit return for eligible expenditures that total more than $1,000, and up to $10,000, which are made between January 28, 2009 and January 31, 2010. To claim the HRTC, Canadians should ensure they keep supporting documents such as receipts to support their claim. For complete information about eligible or non eligible expenditures for HRTC, please visit Canada Revenue Agency web site. 

The information on this site is not intended to be a substitute for professional advice. Each person's situation differs, and a professional advisor can assist you in using the information on this web site to your best advantage.