Tax-Free Savings Account (TFSA) at a Glance
Saving money can be simple—and the Tax-Free Savings Account (TFSA) helps you maximize your savings without worries and taxes. Since its launch in 2009, it has become one of Canada’s most versatile savings tools, allowing your money to grow and be withdrawn completely tax-free, no matter what you're saving for.
Key Benefits
- Tax-free growth: Interest, dividends, and capital gains are not taxed.
- Flexible withdrawals: Access your money anytime without tax or impact on government benefits (such as OAS, GIS, or GST/HST credits).
- No age limit: Contribute throughout your lifetime, unlike RRSPs, which must be converted by age 71.
- Complements RRSPs: While TFSAs do not provide a tax deduction on contributions, they offer flexibility and pair well with RRSPs for retirement planning.
- After-tax contributions, tax-free withdrawals: Contributions come from income you have already paid tax on. Once invested, they grow tax-free, and withdrawals are also tax-free.
Who Can Open and Use a TFSA?
- Eligibility: Any Canadian resident who is 18 or older (and of legal age in their province or territory) with a valid Social Insurance Number.
- Non-residents: You may keep an existing TFSA if you leave Canada, but you will not earn new contribution room. Contributions made while non-resident are subject to a penalty tax.
Contribution Limits
- 2025 annual limit: $7,000. TFSA contribution limits may change annually. For the most up-to-date information specific to your available TFSA contribution room, check your CRA My Account or use the CRA contribution room calculator.
- Cumulative room: If you were 18 or older in 2009 and have lived in Canada since, your total room by 2025 is $102,000.
- Carry forward: Unused contribution room never expires.
- Withdrawals: Amounts you withdraw are added back to your room — but only starting in the next calendar year.
- Over-contributions: The CRA applies a 1% per month penalty on excess amounts.
What Can You Hold in a TFSA?
A TFSA is not just for savings accounts. It can hold a wide range of qualified investments, such as cash, GICs, stocks, bonds, mutual funds, and ETFs. Your choice depends on your goals, time horizon, and risk tolerance. While you can withdraw from your TFSA at any time, some investments may limit access to cash. For example, GICs often have fixed terms, and early withdrawals may not be allowed. tocks and ETFs are generally liquid, however market conditions can affect the timing and value, and settlement typically takes a few days.
RRSP vs TFSA — High-Level Comparison
| Factor | RRSP | TFSA |
|---|---|---|
| Contribution tax deduction | Yes | No |
| Withdrawals taxed | Yes | No* |
| Impact on income-related benefits | Withdrawals count as income and may affect benefits like OAS or GIS | Withdrawals do not count as income |
| Age to stop contributing | End of year you turn 71 | No age limit (as long as resident and eligible) |
| Best use case | Reduces taxable income during high-income years; builds retirement savings | Offers more flexibility for short and medium term goals; complements RRSPs |
*TFSA withdrawals are not taxed. RRSP withdrawals are taxed at source, even if the funds are immediately re-contributed to a TFSA.
Additional Considerations
- Know your TFSA contribution limit to avoid over-contributing.
- Review your investment mix periodically to ensure it matches your goals.
- U.S. and foreign dividend-paying investments held in a TFSA may be subject to foreign withholding tax. Speak with your investment advisor to ensure any foreign investments you hold are tax-efficient.
Securities-related products and services are offered through Raymond James Ltd. (RJL), regulated by the Canadian Investment Regulatory Organization (CIRO) and a Member of the Canadian Investor Protection Fund. RJL financial/investment advisors are not tax advisors, and we recommend that clients seek independent advice from a professional advisor on tax-related matters. Insurance products and services are offered through Raymond James Financial Planning Ltd., which is not regulated by CIRO and is not a Member of the Canadian Investor Protection Fund. Solus Trust Company (“STC”) is an affiliate of Raymond James Ltd. and offers trust services across Canada. STC is not regulated by CIRO and is not a Member of the Canadian Investor Protection Fund.
