Tax-Free Savings Account (TFSA): Everything you need to know

The Tax-Free Savings Account (TFSA) was introduced by the Government of Canada in 2009 to help Canadians save and invest their money – tax-free – throughout their lifetime. It lets you stash extra cash for just about anything whether you are saving for your education, retirement, a home, or simply for a rainy day, the earnings made in your TFSA will generally not be taxed. 


There is an estimation that only 50% of Canadians opened a TFSA since the Government launched it way back in 2009. Why? Maybe because they don’t realize what a great savings option the TFSA can be.

Having a Tax-Free Savings Account, you are in control and you can make contributions and withdraw funds whenever you want without penalty – contributions, however, can only be made if there is available contribution room.

TFSAs are not just for saving. You can also use it to hold and grow a variety of investments, which include exchange-traded funds, stocks, bonds, and GICs.

Who is Eligible for TFSA

The eligibility criteria is simple: any Canadian resident who is the age of majority or older in their province or territory, and has a valid social insurance number (SIN), can open a TFSA. All Canadian residents who meet these criteria for tax purposes can open a TFSA.

Any individual that is a non-resident of Canada who has a valid SIN and who is 18 years of age or older is also eligible to open a TFSA. However, any contributions made while a non-resident will be subject to a 1% tax for each month the contribution stays in the account.

In most provinces, once you turn 18, you can open and contribute to your TFSA according to the dollar limit of that year. In provinces and territories where the legal age is 19, you can still accumulate contribution room when you turn 18, but you will need to wait another year before you can make contributions; that contribution room will carry over to the next year.

How to open a TFSA

To get started with a TFSA, contact your financial institution, credit union, or insurance company.

Contributions to your TFSA

Your contribution room determines the maximum amount that you can contribute to your TFSA.

The annual contribution limit for 2021 is $6,000. TFSA contribution room accumulates each year – either beginning in 2009 or the year the individual turned 18 and is a resident of Canada for tax purposes. Contribution limits from previous years are included in your contribution room, even if you have not opened or contributed to a TFSA.

Example 1: Sofie opened her TFSA in 2020 on her 18th birthday. The contribution limit for that year was $6,000, and she put $2,000 away into her TFSA. In 2021, the contribution limit was $6,000. This means that on January 1, 2021, Sofie had $10,000 of available contribution room for the year ($4,000 unused contribution room from 2020 + 2021 contribution limit of $6,000).

It is important to keep track of your annual TFSA contributions as withdrawals are only added back to your contribution room in the following year.

Example 2: Chris opened his TFSA in 2020, the same year he turned 18. The contribution limit for that year was $6,000, and he put $6,000 into his TFSA in January. Chris had an unexpected expense and withdrew $6,000 in March. In August, Chris had since saved up enough money and decided to put back the $6,000 he had taken out earlier in the year. Chris is now considered to have over contributed to his TFSA. He has exceeded his TFSA annual limit of $6,000 because his net TFSA contributions for the 2020 year are $12,000 ($6,000 in January and $6,000 in August).

To view your TFSA transaction summary online, register for or sign in to My Account.

Must-know tips to manage your TFSA

  • Know your contribution room. Your contribution room may not be the same as your family members’ or friends’. If you are regularly contributing to your TFSA, you can find your most up-to-date contribution room through online services such as My Account and the MyCRA mobile app.
  • Start small. A little goes a long way. Contributing regularly in small amounts can help grow your TFSA over time. For instance, to max out your contribution in 2021, you will need to set aside $115 per week, or $16 per day.
  • Track your TFSA transactions. Keeping records of your contributions and withdrawals will help you determine how much contribution room you have left in your account so that you won’t risk an over-contribution.

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