Tax-free Savings Account

Investment & Savings

Tax-Free Savings Account (TFSA)

A TFSA is a type of registered savings account that allows individuals to save and invest money without paying taxes on the income earned within the account. It was introduced by the Canadian government in 2009.


Tax-free savings account (TFSA): A TFSA lets you save money for any purpose. Your investments can grow tax-free to a certain limit, you can make withdrawals an any time without paying tax, however, contributions are not tax-deductible.

Key Features of a TFSA

  • Contribution Limit: Each year, the Canadian government sets a contribution limit, which represents the maximum amount of money you can contribute to your TFSA. The contribution limit accumulates if you do not use it fully in a given year. The annual contribution limits have varied over the years as you can see below based on the last 3 years which is not exhaustive.


TFSA Dollar Limit

Cumulative Total










  • Tax-Free Growth: Any income earned within the TFSA, such as interest, dividends, or capital gains, is not subject to taxes. Additionally, when you withdraw funds from your TFSA, you do not pay taxes on the amount withdrawn.
  • Flexibility: TFSAs provide flexibility in terms of how you can use the funds. You can hold a variety of investment products within the account, including cash, mutual funds, stocks, bonds, and GICs (Guaranteed Investment Certificates).
  • Age Limit: Any Canadian resident who has a valid Social Insurance Number (SIN) and who is 18 years of age or older is eligible to open a TFSA. You are ineligible to establish or make contributions to a Tax-Free Savings Account (TFSA) until you reach the age of 18. Nonetheless, once you attain the age of 18, you will have the opportunity to contribute up to the maximum TFSA dollar limit applicable for that particular year. Bob turns 18 on March 12, 2023. He will not be able to open and contribute to a TFSA until that date. However, from March 12, 2023, he can open a TFSA and contribute up to the full 2023 TFSA dollar limit.
  • Unused Contribution Room: If you do not contribute the maximum amount in a particular year, the unused contribution room carries forward to future years. You can accumulate unused contribution room indefinitely, allowing you to catch up on missed contributions in the future.
  • Withdrawal and Re-contribution: If you withdraw funds from your TFSA, the amount withdrawn gets added back to your contribution room in the following calendar year. This means you can re-contribute the amount you withdrew, in addition to the next year’s contribution limit, without penalty.

While TFSAs offer tax advantages, they are different from Registered Retirement Savings Plans (RRSPs), which have different rules regarding contributions, tax deductibility, and taxation upon withdrawal.

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