The Honourable James M. Flaherty, P.C., M.P. Minister of Finance

Discusses Tax-Free Savings Account at Budget 2008—Responsible Leadership

This is how it works:

• First, Canadians can contribute up to $5,000 every year to a registered Tax-Free Savings Account, plus carry forward any unused room to future years;
• Second, the investment income, including capital gains, earned in the plan will be exempt from any tax, even when withdrawn;
• Third, Canadians can withdraw from the account at any time without restriction. Better yet, there are no restrictions on what they can save for; and
• Finally, the full amount of withdrawals may be re-contributed to their Tax-Free Savings Account in the future, to ensure no loss in a person’s total savings room.

An RRSP is primarily designed for retirement. In many ways, a Tax-Free Savings Account is like an RRSP for everything else in your life.

It is a powerful incentive to save:

• To help young people saving for their first car;
• To help couples saving for their first home;
• To help seniors stretch their retirement savings further; and
• To help every Canadian set aside a bit of cash each month for a special project, to help their kids, or to simply treat themselves.

To make it easier for lower- and modest-income Canadians to save, there will be no clawbacks. Neither the income or capital gains earned in a Tax-Free Savings Account nor the withdrawals from it will affect eligibility for federal income-tested benefits, such as the Guaranteed Income Supplement.

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