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TFSA (Tax Free Savings Account) is a very under-utilized investment vehicle by Canadians. One of the reasons why individuals do not invest in TFSA is it does not give you a tax deduction instantly, but they fail to realize that over a long-term horizon the growth amount is more than the principal amount. For example, if you invest $ 25000 when your age is 35 and if the rate of return is 8% the value of your portfolio at the 65 will be more than $200K. Here you can see that the growth amount is $175K and that is almost 7 times of the original principal amount.

Let’s understand how the tax rules will apply on $25,000 invested in TFSA, RRSP and non-registered (Open account only).

TFSA: Final Value of portfolio $200K = Zero tax

RRSP: Final Value of portfolio $200K 47.5% Tax =$95,000 (Approx.)

Open: Final Value of portfolio $200K 50% of Capital Gain Tax = $ 41,000 (Approx.)

Can I borrow and invest into TFSA?

Yes, you can.

What is the interest rate for TFSA Loan?

Interest rates depend on financial institution, personal credit rating and other variables. Current TFSA loans rates from B2B bank.

Is the interest paid on TFSA loan is tax deductible?

No, As the growth is tax free CRA do not allow tax deductibility of the interest paid on TFSA loan.

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