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What is the impact of a TFSA on Federal Income-Tested Benefits and Credits?
One of the remarkable upsides to the TFSA is that it can improve savings incentives for low- to modest-income individuals because neither the income earned in a TFSA nor the future withdrawals from it affect eligibility for federal income-tested benefits and credits, such as the Canada Child Tax Benefit, the GST credit, the Age Credit, Old Age Security and Guaranteed Income Supplement benefits.
Snapshot:
Bob and Sally are a modest income earning couple. They expect to receive the Guaranteed Income Supplement (GIS) in addition to Old Age Security and Canada Pension Plan benefits when they retire. They have saved for a number of years in their TFSA and now earn $2,000 a year in interest income, which will not (nor will any TFSA withdrawals) affect the GIS benefits (or any other federal income-tested benefits and credits) they expect to receive. If this $2,000 were earned on an unregistered basis, it would reduce their GIS benefits by $1,000.
Source: CRA
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