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  • Writer's pictureZAREENJIT KAUR LALL

Tax-exempt accounts

Updated: May 19, 2020

Tax-exempt accounts don't deliver a tax benefit when you contribute. You get future tax benefits; withdrawals at retirement are not subject to taxes. Since contributions into the account are made with after-tax dollars, there is no immediate tax advantage. The main advantage is that investment returns grow tax-free.

The most common is a tax-free savings account (TFSA).

If you contribute $5000 into a tax-exempt account today and the funds are invested in a mutual fund that provides a yearly 3% return, in 30 years the account would be valued at $12,135. When you take out the money at retirement, you won't pay taxes on any of it.

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