Are you having trouble understanding the difference between a TFSA Savings Account and a TFSA Broker Account? Well, in this post I have tried to explain just that. Please continue reading to find out the exact differences.
In case you are currently invested through Questrade, TD, or whichever platform, knowing the difference is really important during your investing journey.
First of all, registered (or registered account) refers to a tax-free account such as RRSP or TFSA. Non-registered is a normal account, any profits you make in this are subject to taxes (so are capital gains/losses, etc).
In case you currently have a non-registered account at TD (or any other Canadian financial institution) or are not sure of the account type, you can call them and ask about it. Better be sure about the account type you are investing into, or else you’ll end up paying taxes. Always the goal should be to first max out the TFSA’s and RRSPs (based on your income levels again!) and then proceed with a non-registered investment account (taxable on gains)
In case you currently hold a non-registered account, you can either liquidate and then contribute that cash to your Questrade TFSA or TD TFSA.
Or I think you can also transfer the money to your Questrade as a normal account and then change it to TFSA. Best to confirm the latter option. Usually, you can do this at other brokers. Hope I’m not confusing here.
But, one thing is for sure, you can definitely transfer the existing shares to a non-registered (“margin”) Questrade account and then move them into a Questrade TFSA. You will still have to pay capital gains on what you transfer into the TFSA as this is a “deemed disposition”. However, any losses are superficial and cannot be claimed. You might be better off keeping any losing shares outside of the TFSA or else selling them, booking the loss, and buying something different in the TFSA (buying the same thing in the TFSA would also make it superficial).
The main advantage to this is that it will save you the commission from having to sell everything and then buy it again in the TFSA. Especially in a TFSA, you want to keep fees as low as possible.
Keep in mind though that to keep the non-registered (or any) Questrade account open, it needs to have $250 worth of stock or cash or they’ll probably charge a fee to close the account.
TFSA’s are all registered accounts, regardless if it’s a simple savings account or an investment broker account. You are trying to transfer a non-registered TD investment account into a TFSA investment account.
Registered accounts have special tax implications. The two biggest examples are TFSAs where your money grows tax-free, and RRSPs where your money is taxed when you withdraw it from the plan.
Please make sure you fully understand what TFSAs are, particularly yearly contribution limits and your contribution room (yearly changes).
Finally, if you do have a TFSA savings account, just make sure anything you transfer into a TFSA investment account doesn’t put you over your contribution limit. Happy Investing!!
Thanks for reading! Please let me know your thoughts and comments below.
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Sagar Sridhar is a personal finance blogger from Canada. His genuine passion for personal finance coupled with his unique style of writing is what stands out. Professionally, he is a computer engineer, agile certified and has a master’s degree in Project Management. His writing has been featured or quoted in the leading Canadian publications such as Credit Canada and many other personal finance publications. While he is juggling between his day job and blogging, he is the main author on this blog and has miles to go before making the final pit stop.