Want Your Tax-Refund to grow Tax-Free? Try a TFSA



    TORONTO, May 11 /CNW/ - With the 2008 tax filing deadline now passed,
many Canadians are anxiously awaiting the arrival of their annual tax-refund.
To add to the excitement this year, there is a new way to protect the money
you will be refunded. With the average refund more than $1,400(i), Canadians
can take advantage of what has been heralded as the single most important
savings vehicle since the introduction of the RRSP in the 1950's- the TFSA.

    
    Why a TFSA?
    -  Investments can grow tax-free and can be withdrawn at any time.
    -  While RSPs are about longer term investing - saving for retirement,
       the TFSA is a great way to save for mid-term goals (1-5 years) or to
       supplement retirement savings.
    -  You can invest in a wide variety of products including high-interest
       savings accounts, mutual funds, publicly traded securities, GICs and
       bonds
    

    "This year, Canadians are able to make even more out of their tax-refund
by allowing it to grow tax-free in a TFSA. No matter how big or small your
refund, the TFSA provides you with a powerful tool to save money without
paying any tax on investment earnings or withdrawals. As well, TFSAs are an
attractive option for just about every Canadian and are a particularly
interesting option for retirees and pre-retirees who are looking for another
way to supplement retirement income" said Tina Di Vito, Director, Retirement
Strategies, BMO Financial Group.
    The amount that Canadians can save by putting their money in a TFSA, as
opposed to a taxable account where taxes are owed on earnings, is quite
substantial. So how much can you save by making an annual contribution of a
$1,400 tax-refund into a TFSA as opposed to the same contribution in a taxable
account over 20 years(ii)?

    
    -------------------------------------------------------------------------
                    2% Rate of Return   4% Rate of Return   6% Rate of Return
    -------------------------------------------------------------------------
                       TFSA   Taxable      TFSA   Taxable      TFSA   Taxable
                              Account             Account             Account
    -------------------------------------------------------------------------
    Annual
    Contribution
    of Tax-Refund
    ($1,400)        $34,697   $33,037   $43,357   $39,182   $54,590   $46,691
    -------------------------------------------------------------------------
    

    BMO Financial Group offers a simple online calculator to help make sense
of the benefits you can receive from using a Tax-Free Savings account. For
more information please visit: www.bmo.com/tfsa
    "While the maximum contribution you can make into a TFSA is $5,000 per
year, the account requires no minimum contribution and can be opened with any
amount of money. Using your tax-refund for a TFSA is a great way to get
started or to top-up an existing TFSA account in order to maximize your
contribution." added Di Vito.

    Putting Your Tax-Refund into a TFSA: A Solution for all Ages

    Younger Canadians (18 - 30)
    The tax-free status of these accounts allows younger Canadians who are
just starting to build an independent life for themselves, to accumulate
savings for their goals, such as a new car, first home, return to school or
travel, faster. TFSAs can be used for any goal imaginable and withdrawals can
be made at any time- this provides the flexibility young people are looking
for.

    Canadians between 30 and 60 years of age
    TFSAs give these Canadians an added edge for achieving goals such as
saving for education, home renovations, retirement and financial independence.
Higher income earners and those with a pension plan are likely to have maxed
out their tax-deferred options. TFSAs provide the opportunity for higher
effective return than non-registered investments since investment income and
capital gains in a TFSA are tax-free. Easy access and flexible withdrawals
make TFSAs suitable for emergency funds.

    Pre-retirees, retirees and seniors (age 60 and older)
    Unlike RSPs, people can contribute to a TFSA after age 71, providing
additional opportunities to shelter investment income from tax. Withdrawals
from TFSAs do not affect federal income-tested government benefits, such as
Old Age Security, the Guaranteed Income Supplement and the age amount credit,
so investing in TFSAs can help avoid or minimize claw backs of their benefits.
In addition, individuals who are facing required RIF withdrawals that exceed
their income needs can use TFSAs to shelter some of the money withdrawn from
future tax on income.

    
    -------------------------------------------------------------------------
    (i) Canada Revenue Agency 2008
    (ii) Based on an annual income between $10,000-$39,999 and at an income
    tax rate of 22.5%
    




For further information:

For further information: or to arrange for an interview please contact:
Martha McInnis, Toronto, martha.mcinnis@bmo.com, (416) 867-3996; Lucie
Gosselin, Montreal, lucie.gosselin@bmo.com, (514) 877-1101; Laurie Grant,
Vancouver, laurie.grant@bmo.com, (604) 665-7596; Internet: www.bmo.com/tfsa


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