Does the new Tax-free savings account lower your taxable income?

Does the new Tax-free savings account lower your taxable income? Or does it just protect you from paying tax on interest?

Public Comments

1. With TFSA's, you are no longer taxed on the interest paid on the account. With all other savings accounts, you are taxed on the interest you make.
2. Contributions to a TFSA are not deductible from your income. This is one of the major differences between a TFSA and an RRSP.
3. You are not taxed on any interest accrued in your TFSA account, however it works almost like an RRSP but without penalties for withdrawls. You start with $5000 contribution limit for 2009 and you may withdraw your funds without penalty or tax anytime and you don't have to pay it back like an RRSP. Just don't go over your contribution limit, they don't like that.
4. That tax free savings account has nothing to do with your taxable income when you make a deposit (contributions are not tax-deuctible). All earnings on the account are tax sheltered and take free upon withdrawal. Be careful where you set it up though...not everyone offers the same types of investments that can maximize your tax savings.