The Government of Canada has called it the single most important personal savings vehicle since the introduction of the RRSP. Have you heard about the tax free savings account (TFSA)?

The TFSA became available on January 1, 2009. It allows Canadians aged 18+ to save up to $5,000CDN every year in a TFSA and to withdraw funds and/or investment income - including capital gains - without being taxed. You can also put back the money you've withdrawn without reducing your allowable contributions.

Although there is no tax credit for contributions to a TFSA, Canadians can realize significant savings in using a TFSA to earn interest without paying taxes on that interest.

As of 2007, Canadian pensioners became able to split their pension income - whether from a corporate/other pension plan or certain annuities from an RRIF or RRSP - with their resident spouses or common law partners. If you have eligible pension income, you can use this tax opportunity to split up to one half of your pension with your partner, which may mean significant tax savings for you both.
 

Did you know that capital losses can be carried back 3 years to recover tax paid on capital gains? If you had no capital gains in 2009 but you did have losses, you could use your capital loss to offset a capital gain in any of the 3 previous years (i.e., 2006, 2007 or 2008 taxes).
 

Even if you are certain that you have no balance owing or refund due in a given year, file a tax return for that year. Why? Because filing:

• Reduces the ability of the CRA to subsequently make arbitrary adjustments to your income and taxes owing for that tax year
• Determines your eligibility for government programs, like the Canada Child Tax Benefit (CCTB), GST/HST credit or any new tax rebates that may be announced
• Reports earned income, which increases your future RRSP contribution room - and we all know the value of RRSPs as tax reduction tools

Did you know that the rate at which you're able to claim your charitable donations nearly doubles for amounts over $200? For that reason, you should not claim less than $200 in charitable donations in any year.

Instead, if you want to optimize your tax situation, carry forward charitable donations (for a maximum of 5 years) and claim them all in a year where your income is higher. You can even combine your donations together with your spouse/common-law partner and claim them all on the return of the higher-income spouse, maximizing the credit.

Contributions to a Registered Education Savings Plan (RESP) are not tax deductible. However, any earnings on that investment are sheltered from taxation and not subject to tax until withdrawn when the recipient begins post-secondary education.

Limits for contributing to RESPs:

• There is no annual limit for RESP contributions (prior to 2007, the annual limit was $4000)
• The lifetime RESP contribution limit is $50,000