What is a Tax-Free Savings Account (TFSA)?

TFSAs are much more than a savings account and can create tax-free income in retirement.
TFSAs are among the most useful investment and tax-planning tools.
They may be effective in income-splitting, gifting and estate-planning strategies.

10 Things to know about TFSAs


TFSAs are available to Canadians age 18+


The annual contribution limit is indexed for inflation


You can save tax free for any goal you want (car, home, vacation)


You don’t need to have earned income to contribute


You don’t have to set up a TFSA or file a tax return to earn contribution room


You can take money out when you want, for any reason, without paying any tax


If you take money out, you can re-contribute it the following year, in addition to the annual maximum


You can hold a wide range of investments in a TFSA, like cash, GICs, bonds, stock, mutual funds and segregated funds


You can put money into your spouse’s or common-law partner’s account.


If you have more than one TFSA you are able to transfer funds between them without affecting your contribution room as long as the transfer is done directly between the TFSAs.

TFSA Contribution Limits by Year

TFSA contribution room is indexed for inflation and annual limits vary by year.  If you don’t contribute the full amount each year, you can carry forward the unused amounts, based on the contribution limits for each year.

Here are the annual contribution limits for each year since 2009.

Year                       Contribution Limit

2009                       $5,000

2010                       $5,000

2011                       $5,000

2012                       $5,000

2013                       $5,500

2014                       $5,500

2015                       $10,000

2016                       $5,500

2017                       $5,500

2018                       $5,500

2019                      $6,000

2020                      $6,000

2021                      $6,000

More Information on Tax-Free Savings Accounts

How can I secure my TFSA to benefit my loved ones?


TFSA account holders may designate their spouse or common-law partner as a successor-holder, and anyone else as a beneficiary.  The successor-holder trumps a beneficiary if both are alive at the time of the original planholder’s death.  And, a beneficiary trumps the deceased’s estate if the successor-holder is also dead.  If neither is specified, the assets in the TFSA account become part of the deceased’s estate, losing their tax-sheltered status and becoming subject to probate fees.

What happens to my TFSA when I’m gone?


If a surviving spouse is names the successor-holder in the TFSA contract, he or she will become the new TFSA holder immediately when the original plan-holder dies.  The deceased holder’s TFSA is never de-registered and the assets remain continuously sheltered inside a TFSA.  The successor-holder (surviving spouse or common-law partner) assumes ownership of the TFSA contract and all its contents.

How do stocks affect my TFSA?


For TFSAs that hold securities/stocks if you make frequent trades in your TFSA, you might face a bigger than expected tax bill. The CRA is taking a very aggressive position, in some cases, that some extensive trading in a TFSA could lead to the TFSA carrying on a business.  When a TFSA is deemed to be carrying on a business, any associated gains are taxable as income, negating the TFSA’s tax-sheltering.

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