I know that this type of account does not exist in the US. For those who know, is there absolutely no tax deducted from my earnings when I invest in stocks? For example, if I turn 10000 to 1 million, is it still tax free? https://en.m.wikipedia.org/wiki/Tax-Free_Savings_Account
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1It’s similar to a Roth account in the US.– JTP - Apologise to Monica ♦Commented Jul 28, 2018 at 21:16
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See moneysense.ca/save/investing/tfsa/… for relevant news...– DJohnMCommented Jul 28, 2018 at 21:20
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It's tax free if the $10,000 is invested in a Roth account... In fact, the Wikipedia article specifically mentions Roth accounts.– RonJohnCommented Jul 29, 2018 at 2:31
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@RonJohn: Important to note, though, that a Roth IRA is a retirement account, not a general-purpose savings account.– Ben VoigtCommented Jul 29, 2018 at 2:41
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@BenVoigt can't you withdraw Roth capital gains tax free after 5 years?– RonJohnCommented Jul 29, 2018 at 2:48
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1 Answer
Yes, as long as you follow the rules for a TFSA:
- Do not contribute more than your limit, which can be checked here.
- Do not contribute while you are not living in Canada.
- Only invest in qualified investment (basically anything that is publicly traded on a major exchange; check the list of designated exchanges here: https://www.fin.gc.ca/act/fim-imf/dse-bvd-eng.asp).
You do not need to pay any tax no matter how much you earn on your investments.
Note that, if you invest in foreign (including US) stocks or funds which pay dividends, there are a small amount of taxes witheld by foreign governments that you cannot recover. You do not need to keep track of them or take note of them when you file your taxes, they are subtracted from dividends automatically before you receive the remainder of the dividend.