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Tax Free Savings Account

​There's a lot to know and we're here to help.

The Tax-Free Savings Account (TFSA) allows Canadian residents age 18+ to set money aside in eligible investment vehicles and watch those savings grow throughout their lifetime. Whether your plans are to purchase a car or home, start a small business, take a family vacation or just save for 'a rainy day', there are no restrictions on when or how TFSA funds (contributions and earnings) may be used.  

All income levels can benefit from a TFSA.  A careful review of each person's financial situation will determine how to optimize use of RRSPs, RESPs, RRIFs and TFSAs and we can help with that.

10 things to know about the TFSA

  1. All Canadian residents can open a Tax-Free Savings Account if they're 18 years of age or older and have filed a tax return.
  2. The Tax-Free Savings Account will let you invest while not being taxed on the interest earned on investment savings.
  3. A full range of investment options are available.
  4.  Unlike an RRSP, your contribution to a Tax-Free Savings Account will not be deducted from your income on your tax return, but the interest you earn will not be taxed -- so you get to keep what you earn.
  5. The annual TFSA dollar limit can be found here
  6. If you take money out of your Tax-Free Savings Account, you don't lose the contribution room -- you get it back in the following year.  This is important to remember, because if you take it out you will have to wait until the next year before you can put the money back in.
  7. If you don't make the maximum contribution, you don't lose the contribution room.  The unused contribution room gets carried over to the following year.  There is no limit to how much contribution room can be carried forward.
  8. You can hold more than one Tax-Free Savings Account with any number of financial institutions but the total of the contributions must be within your total contribution limit in that year.
  9. Money you take out of your Tax-Free Savings Account will not affect federal income-tested benefits and credits, so you're not penalized for saving.
  10. Each year, the government will determine and advise you of your remaining available Tax-Free Savings Account contribution limit on your Notice of Assessment.

Investment options

Investment options include:

  • eVest TFSA
  • Smart Savings
  • 1-5 Year Term Deposits
  • Index Linked Term Deposits
  • Step Term Deposits

Eligibility and qualified investments

The individual owning the TFSA is the `Holder'. Any individual person (not trusts or corporations) who meets all of the following three requirements is eligible to open a TFSA:

  • Resident in Canada, and
  • 18 years of age or older, and
  • Holds a valid Social Insurance Number (SIN)

Qualified Investments

The types of eligible investments are restricted under the Income Tax Act and include:

  • Term deposits and GICs
  • Variable interest savings accounts
  • Credit Union sharesIndex-linked term deposits
  • Mutual funds
  • Publicly traded securities
  • Bonds

There are restrictions on holdings in a self-directed TFSA. Check the rules carefully if the investment is in an entity in which the Holder has a significant interest (generally more than 10%) or where there is a non-arm's length relationship.

Non-resident holder

When a Holder is no longer a resident of Canada, the following rules apply:

  • The TFSA may remain open.
  • No contributions may be made.
  • Non-resident Holder will not accumulate contribution room.
  • Withdrawals will not increase contribution room.
  • If a non-resident Holder makes a contribution, the Holder is subject to a 1% per month penalty tax for each month that the contribution remains in the TFSA

If the holder becomes a resident of Canada, contribution room will commence accruing and the Holder may make future contributions.

Contribution limit and unused contribution room

Contribution limit

Contributions to a TFSA may only be made by the Holder and the amount is not tied to the income of the Holder.

  • The annual TFSA dollar limit for 2021 is $6,000; the maximum a Holder may have is $75,500.
  • The maximum contribution limit may increase in future years depending on the rate of inflation and other factors.
  • Contributions are not tax deductible.

NOTE: The Holder is responsible for ensuring the maximum contribution limit is not exceeded. An excess contribution will result in a penalty tax of 1% per month for each month that the excess contribution amount remains in the TFSA.

Unused contribution room

When a TFSA Holder contributes less than the maximum contribution limit, the difference is referred to as `unused contribution room'.

  • Unused contribution room will accumulate each year.
  • Unused contribution room is carried forward indefinitely, allowing the Holder to 'catch up' by contributing more than the maximum contribution limit in a future year.
  • A TFSA withdrawal will increase the contribution room for the year after withdrawal. As a result, when amounts are withdrawn from a TFSA they can be re-contributed in the future when funds become available. Canada Revenue Agency will confirm the contribution room on the annual Notice of Assessment.

NOTE: Individuals who do not have taxable income and who do not file a tax return do not receive the annual C//A Notice of Assessment. Those individual should file a NIL TI Tax Return so CRA can issue a Notice of Assessment that confirms the TFSA contribution room.

Borrowing money to purchase a TFSA

Interest on money borrowed to purchase a TFSA is not deductible for tax purposes.


TFSA Holder may withdraw funds at any time; withdrawals may be restricted by investment terms.

  • Withdrawals are not reported as taxable income and are not subject to income tax.
  • TFSA withdrawals of contribution/earnings will increase contribution room for future years, but not the current year.
  • Withdrawals will not impact eligibility for federal income tested benefits and credits (e.g. OAS, GIS, Age Credit, GST, El, child-tax benefit, working income tax benefit).


A TFSA is transferable to another TFSA owned by the Holder; transfers may be restricted by investment terms.

  • Transferable to a spouse/common-law partner on death of the Holder.
  • Transferable to a former spouse/common-law partner on relationship breakdown

NOTE: A transfer due to death will not affect the TFSA contribution room of the surviving spouse/common-law partner. A transfer due to relationship breakdown will not affect the TFSA contribution room of the Holder or former spouse/common-law partner.

Death of the holder

A TFSA Holder may appoint his/her spouse/ common-law partner as successor holder and beneficiary of the TFSA. Upon death of the Holder, the spouse/common-law partner will become the Holder of the TFSA. Alternatively, the surviving spouse/common-law partner may transfer the funds to a new or existing TFSA in his/her name. There will be no impact on the TFSA contribution room of the surviving spouse/common-law partner.

The Holder may designate someone other than the spouse/common-law partner as beneficiary of the TFSA, or may choose not to name any beneficiary at all. In either circumstance, the fair market value (FMV) of the TFSA at dace of death is tax-free. Any increase in value of the TFSA after date of death becomes taxable income either of the beneficiary or of the deceased's estate, depending on the circumstances and the date of payments.

Mutual funds are offered through Credential Asset Management Inc. and Qtrade Asset Management (a tradename of Credential Asset Management Inc). Mutual Funds and other securities are offered through Qtrade Advisor, a division of Credential Qtrade Securities Inc. 


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