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Tax-Free Savings Account (TFSA) FAQs

Q: What is a Tax-Free Savings Account?

A: Introduced in 2008, it is a registered investment account that shelters most investment growth from tax. Investment growth includes interest, dividends and capital gains.

Q: What are the benefits of a TFSA?

A: It allows you to invest money and have it grow without paying tax on most investment growth throughout your lifetime.


Q: Is there an age limit to opening a TFSA?

A: Yes. You must be 18 or 19 years of age to open a TFSA, depending on which province you live in. Regardless of the province though, your TFSA contribution room begins to accumulate at age 18.


Q: By what age am I required to withdraw all of my TFSA investments?

A: Never. Unlike an RRSP, there is no age limit on a TFSA and you are never required to wind down/withdraw your money.


Q: What are the contribution limits?

A: There is a maximum amount that an individual can contribute to a TFSA in each given year, as mandated by the Federal Government. To date, the following maximums apply:

2009 to 2012: $5,000 per year

2013 to 2014: $5,500 per year

2015: $10,000

2016 to 2018: $5,500 per year

2019 to 2022: $6,000 per year

Q: I did not contribute the entire/any amount in a given year. What happens to my contribution room?

A: Any unused contribution room is carried forwarded and added to the TFSA contribution room for the following year.


Q: Does contribution room accumulate?

A: Yes. There is a cumulative amount. As of 2022, the total amount one individual can contribute to a TFSA is $81,500, assuming they were at least 18 years of age in 2009.


Q: Is my contribution tax-deductible?

A: No. Unlike an RRSP, your investment growth is never taxed, not even at withdrawal so your contribution will not generate a tax-refund.


Q: Can I have more than one TFSA?

A: Yes. You can have as many TFSAs as you wish. However, the total contributed amounts across all of your plans cannot exceed the total accumulated contribution room to date.


Q: Can I withdraw my money from my TFSA?

A: Yes! Withdrawals can be done any time, assuming there are no liquidity restrictions on the investment product you are using.


Q: Do I lose my contribution room after withdrawing money?

A: No. Any total amount you withdraw from your TFSA during one calendar year will be added to your contribution room for the following calendar year.


Q: I have over-contributed to my TFSA. What happens now?

A: Be very cautious not to over-contribute as you will be penalized by the CRA with a 1% tax on the excess amount for every month you are over the limit. The penalty tax will continue to be levied on you until such time that either (1) you withdraw the entire excess amount, or (2) the excess amount is absorbed by additions to the unused contribution room in following calendar years.


Q: Can I contribute to my spouse’s and/or adult child’s TFSA?

A: Yes, as long as he/she has adequate contribution room available. Remember that this is deemed a gift. While any investment growth would not be attributed back to you, you are also no longer in control of that money so plan accordingly.


Q: What investment options are available for TFSAs?

A: Contrary to its misleading naming, TFSAs are NOT strictly savings accounts. Your investment choices are similar to an RRSP and include Guaranteed Investment Certificates (GICS), mutual funds, exchange-traded funds, and stocks, among others.


Q: I collect federal income-tested benefits. Do contributions and/or withdrawals affect my eligibility for these benefits?

A: No. The TFSA program is not included in the income calculations for such benefits as the Canada Child Benefit and Old-Age Security.


Q: Can contributions be done on an “in-kind” basis?

A: Yes. You can transfer most investments from a non-registered account to a TFSA without selling the investment first. However, be careful of potential tax consequences of such a move.


Q: Can I transfer funds between two TFSAs in my name?

A: Yes. As long as the transfer is processed correctly, your contribution room will not be impacted nor will you face contribution penalties.

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