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Interest paid in TFS Account.

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ayaz99
Member since: Nov 04

Posts: 33
Location: AB, CA
Post ID: #PID

Posted on: 24-01-11 12:52:32

We have TSF (contributed to the max.) with a financial institution, I noticed that the interest paid accumulates in the same TFS accounts, therefore the total amount in TFS exceeded from the max. contribution limit. we were quick to move the extra amout to non TFS but this is my concern, I read last year CRA issued notices to TFS account holders who exceeded their contribution limits (I think they over contributed) but how about in this case?

dimple2001
Member since: Apr 04

Posts: 2873
Location: Western Hemisphere
Post ID: #PID

Posted on: 24-01-11 12:57:03

Quote:
Originally posted by ayaz99

We have TSF (contributed to the max.) with a financial institution, I noticed that the interest paid accumulates in the same TFS accounts, therefore the total amount in TFS exceeded from the max. contribution limit. we were quick to move the extra amout to non TFS but this is my concern, I read last year CRA issued notices to TFS account holders who exceeded their contribution limits (I think they over contributed) but how about in this case?

Interest is not considered contribution or extra amount. So, nothing to worry.

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Dimple2001

pratickm
Member since: Feb 04

Posts: 2831
Location: Toronto
Post ID: #PID

Posted on: 24-01-11 13:00:42

Quote:
Originally posted by ayaz99
we were quick to move the extra amout to non TFS but this is my concern, I read last year CRA issued notices to TFS account holders who exceeded their contribution limits (I think they over contributed) but how about in this case?

As dimple2001 said, accumulated interest (or gains or dividends, etc.) is not considered a contribution.
Since you withdrew the interest last time, be careful not to re-deposit it again if you have already contributed the $5,000 for the current year.
So say if you withdrew $100 on 2nd Jan 2011 and then contributed $5,000 on 10th Jan 2011, do NOT re-deposit the $100 this year.
You may deposit $5,100 in 2012.

That is what happened last year with all those CRA notices that you refer.

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"Mah deah, there is much more money to be made in the destruction of civilization than in building it up."

-- Rhett Butler in "Gone with the Wind"

Iceberg
Member since: May 05

Posts: 919
Location: GTA and beyond
Post ID: #PID

Posted on: 24-01-11 13:03:55

Who told this to you? Your financial institution?

TFSA - Tax Free Savings Account. Any income within the account is Tax Free. This is the very purpose of the account. And any gains like interest, capital gains are not a part of the contribution.

Quote:
Originally posted by ayaz99

We have TSF (contributed to the max.) with a financial institution, I noticed that the interest paid accumulates in the same TFS accounts, therefore the total amount in TFS exceeded from the max. contribution limit. we were quick to move the extra amout to non TFS but this is my concern, I read last year CRA issued notices to TFS account holders who exceeded their contribution limits (I think they over contributed) but how about in this case?

ayaz99
Member since: Nov 04

Posts: 33
Location: AB, CA
Post ID: #PID

Posted on: 25-01-11 13:31:08

Thanks for your replies, I know any gains in TSF is tax free, which is the purpose of the account but the concern was if the limit exceeds with the gain then the further gains will be compounded on the total amount (which exceeds the limits).
Thanks for the calrifications.

dimple2001
Member since: Apr 04

Posts: 2873
Location: Western Hemisphere
Post ID: #PID

Posted on: 25-01-11 13:34:37

Quote:
Originally posted by ayaz99

Thanks for your replies, I know any gains in TSF is tax free, which is the purpose of the account but the concern was if the limit exceeds with the gain then the further gains will be compounded on the total amount (which exceeds the limits).
Thanks for the calrifications.

The whole point of an investment is to earn money (growth). Same concept with RSP as well. Growth inside the RSP is not part of your contribution limits; however, unlike the TFSA, RSP growth is tax deferred (taxable when withdrawn).

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Dimple2001

jigz787
Member since: Aug 04

Posts: 773
Location: Toronto
Post ID: #PID

Posted on: 25-01-11 13:44:25

Quote:
Originally posted by ayaz99

Thanks for your replies, I know any gains in TSF is tax free, which is the purpose of the account but the concern was if the limit exceeds with the gain then the further gains will be compounded on the total amount (which exceeds the limits).
Thanks for the calrifications.

What ever you gain is not what you 'contributed' and therefore, it does not count as your 'contribution' limit.
Do not mix contrubutions and gains. Gains have nothing to do with contribution.

Contributors: pratickm(7) BlueLobster(7) Iceberg(3) jigz787(3) ayaz99(2) dimple2001(2) Your friend(1) Diego(1)

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Interest paid in TFS Account.

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