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What you need to know about TFSAs

December 19, 2023

A tax-free savings account (TFSA) lets you save money tax-free so you can achieve your goals, build an emergency fund and even top up your retirement savings.

Although TFSAs are very popular, there are many benefits that some people still don’t know about. Here’s what you need to know to get the most out of this investment vehicle.

Withdrawals are tax-free

TFSA withdrawals—capital and interest—are tax-free. That means you can withdraw funds from your TFSA as often as you want without tax penalty. The money you withdraw isn’t added to your income, so you can use it without affecting your eligibility for certain tax credits and social programs like the Canada Child Benefit or the GST/HST credit, which are based on your declared income.

TFSA contributions aren’t deductible from income

Unlike registered retirement savings plans (RRSPs), you can’t deduct your TFSA contributions, so you don’t need to include your TFSA tax slips with your income tax return. Since contributions aren’t deductible, you won’t be taxed on withdrawals.

Anyone can open a TFSA

Any Canadian resident aged 18 or older since 2009 can contribute to a TFSA. That includes students, employees, self-employed workers and retirees.

Having more than one TFSA doesn’t increase your contribution limit

You can invest in multiple TFSAs. However, you’ll need to make sure your combined contributions don’t go over your annual limit, which is per person and for all held accounts. The 2024 contribution limit is $7,000. However, contribution room accumulates each year, so if you don’t max out your TFSA, your unused contribution room will roll over to the following year. That means that if you’re a Canadian resident, were 18 or older in 2009, and have never contributed to a TFSA, you have a total contribution room of $95,000 in 2024. Any TFSA over-contributions are subject to a 1% penalty per month. To find out the exact TFSA and RRSP contribution limits, visit the CRA website.

It’s up to you to decide how and where to invest that amount. You can diversify your TFSA portfolio while making sure to not go over your limit. Your advisor can help you select investments that are in line with your goals.


There are a number of investment options that you can set up for automatic contributions. Select an amount that fits your budget. You could start growing your investment right from day one!

Withdrawals are added back to your contribution room

You can re-contribute any amounts you’ve withdrawn from your TFSA. This amount is added back to your contribution room the following year. For example, let’s say you contribute $6,000 in January and withdraw $3,000 in June; if you’ve already reached your contribution limit for the current year, you’ll need to wait until next January to re-contribute that $3,000. That’s why you need to keep an eye on your deposits and withdrawals, especially if you make frequent withdrawals.

TFSAs are popular because they’re so flexible. But they aren’t a regular savings account. To get the most out of your TFSA (that is, earn tax-free interest), your contributions need time to grow. That means they need to be invested in a diversified portfolio over the medium- or long-term, based on your profile.

TFSA basics

  1. TFSAs are ideal for medium- and long-term savings goals.
  2. Try to keep withdrawals to a minimum.
  3. It’s a flexible plan, but you need to make sure you stay within your contribution limit.