There are numerous benefits associated with opening a TFSA, even if you are capable of saving only a little on a yearly basis. Owing to the fact that you do not have to pay any taxes on your savings as per the rules and regulations stipulated by the TFSA, you are able to build your savings faster. Some of the reasons of opening a TFSA include:
- By contributing in the TFSA, you are simultaneously contributing into your RRSP as well- Once you retire, you would be able to withdraw your income directly from your TFSA, free of tax. This will also help you in delaying withdrawing cash that you had saved in your RRSP, thereby delaying the payment of taxes that you would have had to for those withdrawals.
- You should expect a higher income tax rate while taking out money from your TFSA- The money that you have contributed into your TFSA has already been taxed. Therefore, if you have a marginal tax rate that is high, during the time of taking out money, remember that you are actually paying less in taxes. If you are saving in an RRSP, the opposite becomes true. A higher rate of tax over time will concurrently increase the tax bill that you have when you are withdrawing funds from a RRSP account.
- Reduce taxes levied on your investments- TFSA accounts can be used to shelter those investments that would be otherwise taxed at the highest possible rates. It is because of the reason that you do not have to pay taxes on the earnings you made on your TFSA account. Some examples of these kinds of earnings include foreign dividends and interest incomes.
Although, you have realized the reasons that you need to consider and start investing in a TFSA, there still remain intricacies that only a professional would be able to clarify to you. For example, in order to use your TFSA account as an effective tool while planning for your taxes, the consultation of a professional on what would be the best approach is very important. In order to avail the best services in the field, contact us at Best Capital Bonds. We ensure that your investments and TFSA accounts are handled with utmost expertise and professionalism, allowing you to relax and let us tackle all the legal intricacies. Contact us today to know more.