Gordon Pape: A Tax Advantage to TFSA Withdrawal
A reader wants to know: Is there any tax advantage to taking out money before year-end?
Q – In a recent tax tip article in the paper it advised to withdraw funds from a TFSA in December and then add them back to the next year’s contribution limit. It didn’t explain why this would be beneficial. Is it? If so, please explain. – Barry D., Duncan BC.
A – The only tax advantage I can think of is a situation where you need some cash in December (Christmas shopping and all) and you don’t want to receive if from a taxable source, such as a RRIF, RRSP, or, if you’re a business owner, salary or dividends. A TFSA withdrawal provides the cash you need at the time and then you can pay it back in the New Year. – G.P.