Tax Free Savings Account

After an RRSP, the TFSA is, without question, the most advantageous investment vehicle created by the Canadian government to encourage personal savings. More flexible than an RRSP, it allows you to put money aside on a tax-free basis for a project (car, house, vacation…) to be used whenever you wish.


Canadians 18 and older can contribute annually to their TFSA. The contribution limit is set annually and is $6,000 for 2019. The limit increases periodically, based on inflation and rounded to the nearest $500. Unlike RRSP contributions, TFSA contributions are not deductible for income tax purposes. But any investment income earned within a TFSA is tax free. As with RRSPs, unused contribution amounts can be carried forward to future years.


You can withdraw any amount from a TFSA at any time without paying tax. You can also put that money back into your TFSA, but you must wait until the next calendar year if you’ve contributed the maximum amount.

Characteristics and Advantages

  • You can contribute up to the annual limit regardless of your income. The limit for 2019 is $6,000 and will be indexed thereafter based on inflation. Furthermore, you may carry forward any unused contribution room
  • Your savings grow tax-free because your contributions and any earnings generated are not taxable
  • You can put funds aside tax-free, such as an inheritance, a donation or investment income
  • You may withdraw any amount at any time without penalty
  • You can still save for your retirement even if you have reached your maximum contribution limit for your RRSP.


Five questions and answers about TFSAs

Yes, although all accounts are still subject to the single combined
annual contribution limit – currently $6,000.

If, at any time, you contribute an amount above your annual
limit, you’ll be charged a tax of 1% per month on the excess
amount until it’s withdrawn or until your TFSA contribution
room for the following year resets.

You can certainly contribute foreign funds to a TFSA – the
issuer will simply convert the funds to Canadian dollars using
the applicable exchange rate on the date of the transaction. The
total amount of your contribution (in Canadian dollars) cannot
exceed your TFSA contribution room. If dividend income from
a foreign country is paid to a TFSA, the dividend income could
be subject to foreign withholding tax.

You can’t share an account but you may contribute to your
spouse or common-law partner’s TFSA, subject to his or her
available contribution room.

If you name your spouse or common-law partner as the
successor account holder, your TFSA funds can be easily
transferred and continue to grow tax-free. If you don’t appoint
a successor account holder, additional steps are required.