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TFSA Withdrawals

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RRSPs RRIFs and TFSAs -> Tax-free savings accounts (TFSAs) -> Withdrawals

TFSA Withdrawals

Here is the basic information regarding withdrawals from a tax-free savings account:

bullet Withdrawals will create additional contribution room equal to the amount of the withdrawal, for deposits in future years (not in the year of the withdrawal).
bullet Income earned in  and withdrawals from a TFSA will not affect eligibility for federal income-tested benefits and credits such as
bullet guaranteed income supplement (GIS)
bullet old age security (OAS)
bullet age exemption tax credit
bullet Any fees paid related to the TFSA will not be tax-deductible.
bullet In kind withdrawals can be made, with the investments being transferred to a non-registered account, or as a contribution to an RRSP, subject to available RRSP contribution room.  When in kind withdrawals are made, the value of the transaction will be the current market value of the investment.  This will be the contribution amount if the investment is transferred to an RRSP.  If the investment is transferred to a non-registered account, the current market value at time of withdrawal will be the cost basis for the non-registered investment.  Any subsequent capital gain or loss when the investment is sold will use this value as the cost basis.

If the maximum has been contributed to a TFSA, and then a withdrawal is made, no further amount can be contributed (without penalty) until the following year.  On January 1st of the following year, the withdrawal amount from the previous year will be used to increase your regular annual contribution room.

Amendments to the Income Tax Act in Bill C-47, which became law in December 2010, included rules to ensure that any withdrawals of amounts regarding deliberate overcontributions, prohibited investments, non-qualified investments, asset transfer transactions and income related to those amounts do not constitute withdrawals for TFSA purposes, and do not create additional TFSA contribution room.

Department of Finance information

bullet

October 16, 2009 proposal re technical changes to TFSAs

Tax Tip:  Unless you are retired, you are usually better to withdraw money from a TFSA instead of an RRSP.

Previous:

bullet What is Better - TFSA or RRSP?
bullet TFSA Contribution Rules and Limits
bullet Don't Overcontribute!
bullet Unused Contribution Room
bullet TFSA Investments - qualified, non-qualified, and prohibited

Next:

bullet Asset Transfer (Swap) Transactions
bullet Taxes Payable re TFSA
bullet Marital Breakdown
bullet Death of the TFSA Holder

Back to TFSA main page.

Revised: November 26, 2016

 

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