TFSAs
The Tax-Free Savings Account (TFSA) is a flexible, registered, general-purpose savings vehicle that allows Canadians to earn tax-free investment income to more easily meet their savings goals.
The TFSA complements existing registered savings plans like Registered Retirement Savings Plans (RRSPs) and Registered Education Savings Plans (RESPs).
Depositors are 100% protected!
Deposits are 100% guaranteed by the Credit Union Deposit Insurance Corporation of British Columbia*Want to learn more about TFSAs?
Check out our Understanding TFSAs digital brochure >Features and Benefits of TFSAs
Features & Benefits of TFSAs
- Available for indviduals 18 years and older
- Contributions will not be tax deductible
- Capital gains and other investment income will not be taxed
- Withdrawals can be made at any time, tax-free
- Neither income earned in an account, nor withdrawals will affect eligibility for federal income tested benefits or credits
- Any amounts withdrawn will be added back to the individual's contribution room for the following year
How much can I earn?
Say you contribute $5,000 to a TFSA and invest it in a term deposit inside the TFSA, which earns 1.5% over one year, the growth on this term would be $75. Because the money is invested in a TFSA the entire $75 growth goes to you!
Normally, in a non-registered account this growth would be taxable. How taxable? Well, assuming that the entire gain consists of taxable income and you are in a 40% marginal tax bracket, you would owe $30 in taxes and therefore would only be left with $45 in growth.
Contribution Room
Contribution Room
For 2023, eligible Canadians can contribute up to $6,500 to a TFSA.
Previous contribution limits were:
- 2019-2022: $6,000 (per year)
- 2016-2018: $5,500 (per year)
- 2015: $10,000
- 2013-2014: $5,500 (per year)
- 2009-2012: $5,000 (per year)
Similar to annual RRSP contribution limits, unused TFSA contribution room can be carried over to the following tax year. For example, if you contributed $4,000 of your allowable $5,500 to a TFSA in 2013, in 2014 you would be eligible to contribute $7,000 ($1,500 of the unused portion from 2013, plus $5,500 for 2014).
Over Contributions
Over Contributions
If you have multiple TFSA investments, it’s important to keep track of each so that you don’t exceed contribution room in your TFSA. If you over-contribute to your TFSA, you may be subject to a one-percent penalty for each month the over-contribution stays in your account.
This process seems straightforward enough, but withdrawing funds from the TFSA has caused confusion among thousands of Canadians.
Although funds can be withdrawn from your TFSA at any time without penalty, you can’t simply re-contribute the funds to your account whenever you want—even if you have unused contribution room.
You can re-contribute funds withdrawn from your TFSA, up to the allotted contribution amount per year, but you have to wait until the following tax year before you can put the funds back.
¹180-day TFSA term is applicable to new funds only. Some restrictions apply. Rates are subject to change without notice. Rates shown are calculated on a per annum basis.
²Conditions apply. Rates subject to change without notice.
