New tax-free savings plan introduced in federal budget



Fred Chartrand/The CaNADIAN PRESS


Finance Minister Jim Flaherty gives a thumbs up yesterday as he delivers his budget speech in the House of Commons in Ottawa.


Finance Minister Jim Flaherty invited Canadians to Save Your Money as he introduced a $5,000-per-year savings plan in a politically attuned budget that sprinkled modest benefits on a wide range of voters.

Beginning in 2009, a new Tax-Free Savings Account would allow anyone 18 or older to sock away savings without paying taxes on the earnings or investment income generated in the account. The $5,000 annual limit will build year after year and account holders will be able to withdraw their savings tax-free at any time.

"If we are to help families prepare for the long term, we must ensure Canadians have the right incentives to save for the future," Flaherty told the House of Commons.

With an election hanging in the balance, the Harper government’s third budget was dressed up with dozens of tax and spending flourishes.

But it offered only very limited help for manufacturers and employees struggling with the economic slump in Ontario and Quebec. Leaders from business, unions and the political opposition derided it as a gimmick-ridden package that ignores today’s crisis in the country’s industrial heartland.

how it works

  • Under the Tax-Free Savings Account plan, adults can put in up to $5,000 per year, with unused room carried forward. Contributions will not be tax deductible like contributions to RRSPs but the income gains within the account will be tax-free when they are withdrawn.