Why Tax Free Savings Accounts are a Good Idea: Part 3

Yesterday we explained the second reason why a Tax Free Savings Account is a good idea: they make it more difficult to get at your money, so you increase your chances of building your savings.

Another good reason for starting a TFSA is that any savings you accumulate and then withdraw have no tax consequences and do not affect your eligibility for federal income-tested benefits and credits. As explained on the CRA TFSA web site, since the income is not taxable, it does not increase your taxable income, so the government won’t “claw back” any of your benefits.

If you have other income (like from a job or other investments), that increase in income could impact the amount you receive in other government benefits.  With a TFSA, it’s your money, and there are no tax consequences.

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