- Who is eligible to open and to contribute to a TFSA? Residents in Canada, who are 18 years of age or older with a valid Social Insurance Number (SIN).
- What’s the annual contribution limit? $7,000 for 2025. For subsequent tax years, the contribution limit will be indexed with inflation in $500 increments. Previously, the annual limit was $5,000 per year from 2009 to 2012; $5,500 each for 2013 and 2014; $10,000 in 2015; $5,500 per year from 2016 to 2018; $6,000 per year from 2019 to 2022; $6,500 in 2023 and $7,000 in 2024. Only people eligible for TFSAs in past years (see criteria above) are entitled to accumulate TFSA contribution room from those past years. For example, someone who opened a TFSA in 2009 but was non-resident from 2010-2014 cannot make TFSA contributions in 2010-2014, and cannot make “catch up” contributions for those years even if they became a Canadian resident again later (e.g. in 2015).
- Is that all I can contribute? Not necessarily. Any amounts withdrawn are added to your contribution room for the following year. And, unused contribution room from a prior year (if eligible then) can be carried forward, even if you haven’t opened a TFSA account. See TFSA contributions and Replacing withdrawals.
- Are TFSA contributions tax-deductible? Contributions cannot be deducted on your tax return. However, both income earned while in the TFSA, and withdrawals from TFSA are non-taxable and do not affect any federal income-tested benefits and tax credits.
- Are TFSA withdrawals taxable? No. All withdrawals are non-taxable, and do not affect federal income-tested benefits and tax credits.
- What if I contribute more than allowed? Excess contributions are penalized at 1% per month (similar to RRSP excess contributions) until withdrawn. Unlike with RRSPs, there is no penalty-free overcontribution room. Also, effective October 16, 2009, any earnings or increase in value reasonably attributable to a “deliberate excess contribution” will be considered an advantage and subject to additional tax. See Tax payable on an advantage for details.
- What if I don’t use all my annual contribution limit? Unused contribution room can be carried forward indefinitely, to use in a future year.
- Is there a maximum age for contributing to a TFSA? No, unlike RRSPs.
- What type of investments can I hold in a TFSA? Similar investments to what you can hold in an RRSP or RRIF, including term deposits, mutual funds, stocks, bonds, and GICs. See Types of permitted investments*.
- Can I borrow to invest in a TFSA? Yes, but you cannot deduct borrowing costs because income earned in a TFSA is not taxable.
- Can I use my TFSA as collateral for a loan? Yes, you can use a Vancity TFSA as collateral for a Vancity loan.
- Can I give my spouse money to contribute to their TFSA? Yes. And income earned from their TFSA is not attributed back to you, as long as your spouse spends rather than invests any TFSA withdrawals.
- What happens to a TFSA upon death? The fair market value of the TFSA at the date of death is received tax-free by the planholder’s estate or designated beneficiary**. But after the date of death, income or gains earned on the TFSA become taxable. Naming your spouse as a “successor account holder” allows them to take over your TFSA or transfer your TFSA into their own TFSA tax-free, without impacting their contribution room.
- Can we divide a TFSA upon separation or divorce? Yes, upon a relationship breakdown, any amount from a TFSA can be transferred directly to your spouse’s TFSA, and will remain tax-free. However, contribution room is not given back to you (as the transferring spouse), nor does your spouse lose any of their contribution room.
- What happens to my TFSA if I become a Non-resident of Canada? You can still keep your TFSA. Income earned and withdrawals made still remain tax-free in Canada. (Check with the country you become resident of on their tax treatment of your TFSA though.) But once you are non-resident, you can no longer contribute to your TFSA, nor do you accumulate more contribution room.
- If I leave Canada for a period, but then return, do I accumulate contribution room during the period I am away? Only if you were still considered a “factual” resident of Canada (i.e. you still maintain ties to Canada by having a financial account, driver’s license, and do not file taxes as a non-resident), you may continue accumulating TFSA contribution room while abroad.
- Is there a simple way to track my TFSA contribution limit? Log into your CRA My Account to check your TFSA contribution limit, review and verify your past TFSA withdrawals, and more.
- If I have a U.S. connection, what should I know about TFSAs? TFSAs are not yet covered by the Canada-US Income Tax Treaty, and therefore are not tax-exempt on U.S. tax returns. As well, TFSAs may be subject to additional income tax reporting as “trusts”. We strongly recommend you seek cross-border professional income tax advice before opening a TFSA.
- Are TFSAs better than RRSPs? Possibly, for certain individuals.
- What if I have more questions? See these links:
- 2019 Federal Budget extends tax liability on income from carrying on a business (such as day trading) in a TFSA to the holder.
** All provinces and territories except Quebec permit TFSA beneficiary designations.
The response set out above is for your information only and is based on general assumptions and the facts presented to Vancity Investment Management. While our goal is to offer current, accurate and clearly expressed information, Vancity Investment Management does not warrant the accuracy, adequacy or timeliness of this information. Changes to the assumptions or facts or to any applicable laws or regulations could affect the validity of this information. The information is not intended to be investment, legal, accounting, tax or other advice and you should not rely on it without seeking the advice of professional advisors to ensure your particular circumstances are properly considered. Vancity Investment Management is not responsible for loss or damage that results from reliance on this information.
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