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Starting in 2009, Canadian residents who are 18 years of age or older will be able to earn tax-free investment income within a Tax-Free Savings Account (TFSA) during their lifetime.
Contributions to a TFSA are not deductible for income tax purposes. Also, interest on money borrowed to invest in a TFSA is not tax deductible. However, the income generated in such an account (for example, investment income and capital gains) is tax-free, even when it is withdrawn.
The TFSA dollar limit is $5,000 in 2009, and will be indexed to inflation and rounded to the nearest $500 in later years. Unused TFSA contribution room can be carried forward to later years. The total of TFSA withdrawals in a calendar year is added to the TFSA contribution room for the next calendar year.
Every Canadian citizen who is age 18 or older and files an income tax return is eligible to contribute to a TFSA
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