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How can I find tax savings and help my community?

How can I find tax savings and help my community?

Can you find tax savings while doing good in your community? Good Money™ believes you can.

Here are some frequently-asked questions about tax planning, along with some detailed information about Registered Retirement Savings Plans (RRSPs) and Tax-Free Savings Accounts (TFSAs). These products can help you manage tax expenses, while building a strong economy and a vibrant neighbourhood for everyone in your community.

Q: Do you have any easy tax savings tips?
A: By contributing to a Registered Retirement Savings Plan (RRSP), you generate certain tax deductions. Plus, you may secure tax-deferred growth on the assets in your RRSP. Tax-Free Savings Account (TFSA) contributions provide tax-free compound growth for your savings.

Q: So which one is better—a TFSA or an RRSP?
A: That depends on your personal financial circumstances. Some things to consider are:

  • your current taxable income, and income tax rate;
  • your future taxable income, and income tax rate;
  • current government benefits and/or credits, with and without RRSP deductions;
  • future likely government benefits/credits, with and without RRSP deductions, and with and without RRSP withdrawals;
  • your other retirement savings and plans (e.g. defined benefit pension plan, non-RRSPs, etc.?);
  • how much retirement income do you need, and when will you need it?

A Vancity investment professional can help you decide which type of savings plan best suits your needs and circumstances.

Q: Does a TFSA generate tax savings?
A: Not immediately—that’s one of the main differences between a TFSA and an RRSP. A TFSA allows the income you earn on eligible investments to grow tax free.  And  withdrawals from TFSAs are also not taxable income in Canada.

Q: What type of investments can you put in a TFSA?
A: Most RRSP/RRIF eligible investments are eligible for TFSAs, including savings accounts, term deposits, mutual funds, stocks, bonds or Guaranteed Investment Certificates (GICs)*.             

Q: What if I need to access my funds in an emergency?
A: TFSAs are ideal to use as a short-term emergency fund. You won’t get taxed on withdrawals, and you can re-contribute your withdrawal the following year, once the emergency passes. You might want to consider holding highly liquid investments such as a Jumpstart® High Interest Savings Account if you anticipate using your TFSA this way.

Q: How can these tax-savings tools help others?
A: When you do business with us, we invest in your community: through loans, mortgages and support for emerging businesses and projects that improve your neighbourhood socially and economically.

Q.  Should I invest in a TFSA if I have U.S. income tax filing obligations (e.g. due to current or past U.S. citizenship or greencard)?
A: You should consult with an experienced cross-border income tax specialist before investing in a TFSA, to discuss how it impacts your U.S. income tax filing requirements.

Interested in maximizing your tax savings? A Vancity investment professional can help you explore your tax savings options, and set up a pre-authorized contribution program for your RRSP or TFSA. When you’re ready, call 604.877.7000 or toll-free at 1.888.Vancity (826.2489) and we’ll be happy to discuss how you can minimize your tax bill with a personalized Good Money Plan™.

Good Money™ and Good Money Plan™ are trademarks of Vancouver City Savings Credit Union.
*Credential disclosure and mutual funds disclaimer.
The response set out above is for your information only and is based on general assumptions. While our goal is to offer current, accurate and clearly expressed information, Vancity does not warrant the accuracy, adequacy or timeliness of this information. Changes to the assumptions or facts or to any applicable laws or regulations could affect the validity of this information.  The information is not intended to be investment, legal, accounting, tax or other advice and you should not rely on it without seeking the advice of professional advisors to ensure your particular circumstances are properly considered. Vancity is not responsible for loss or damage that results from reliance on this information.