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Calculation Assumptions

This calculator estimates the income tax savings you can realize in a Tax Free Savings Account (TFSA). The TFSA took effect on January 1, 2009.

The calculator assumes that:

– No personal income tax is levied on the investment income or gains accruing in the TFSA.

– Your annual income is used as a basis for estimating the federal income tax rate applicable to the investment income accruing in the taxable account. Your actual tax rate may be different depending on the amount and type of deductions you claim.

– The provincial income tax rate applicable to investment income accruing in the taxable account is equal to half of the federal income tax rate.

– TFSA contributions are invested in a diversified portfolio with a return consisting of 40% interest, 30% dividends and 30% capital gains.

– Lump sump TFSA contributions are made at the start of the year, annual contributions are made mid-year, and monthly contributions are made at the beginning of each month.

The calculator compares the future value of representative investment in a TFSA with the future value of the same investment made in a taxable account, and estimates the total tax savings. The future value of the investment is determined by the amount of contributions made to the account, the number of years in which the investment is held or the contributions are made, the rate of return on the investment, and the personal income tax rate applicable to the investment income accruing in the taxable account.

This calculator is not intended to serve as a financial planning tool. Individuals are encouraged to seek independent professional financial advice regarding their savings needs and choice of savings vehicles. The actual value of federal tax savings will vary depending on the particular situation of each individual.

 
 

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