TFSA rules in Canada: limits, withdrawals and over-contributions
A TFSA lets Canadian residents aged 18 or older with a valid SIN save or invest without paying tax on growth or withdrawals. Room builds each year from the year you turn 18, unused room carries forward, and amounts you withdraw are added back to your room on January 1 of the following year.
Who can open a TFSA
You need to be a resident of Canada, at least 18 years old and have a valid Social Insurance Number. In provinces and territories where the age of majority is 19, some institutions only open accounts at 19, but your contribution room still starts accumulating at 18.
How contribution room works
The Canada Revenue Agency sets an annual dollar limit. Room starts accruing in the year you turn 18 (or 2009, whichever is later) and any unused room carries forward indefinitely. Your exact room appears in your CRA My Account, which is the figure to rely on rather than your own estimate.
- Withdrawals are added back to room on January 1 of the next year, not immediately.
- Contributions across all your TFSAs at every institution share one limit.
- Transfers between institutions should be done as a direct transfer so they do not count as a new contribution.
What it costs to get it wrong
Excess contributions are taxed at 1% per month on the highest excess amount in that month until you withdraw it. The most common cause is withdrawing and putting money back in the same calendar year when you had no spare room.
What you can hold
A TFSA can hold cash, GICs, bonds, ETFs, mutual funds and listed stocks. The account type is the wrapper; the product inside decides your risk and return. Compare high-interest savings TFSAs if you need the money soon, and investment TFSAs at brokerages or robo-advisors for longer goals.
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Frequently asked questions
- Do TFSA withdrawals count as income?
- No. Withdrawals are not taxable and do not affect federal income-tested benefits such as the Canada Child Benefit or Old Age Security.
- Can I have more than one TFSA?
- Yes, but all contributions across them count against the same personal limit.
- What happens to my TFSA if I leave Canada?
- You can keep it, but you stop gaining new room while non-resident and contributions made while non-resident are taxed at 1% per month.
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Official sources
General information only, not personalized financial, tax or legal advice. Rules change; confirm current details with the source.
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