Tax-Free Savings Account (TFSA)
Easy, flexible investing for your future
What is a TFSA?
Like the RRSP, the TFSA is a registered account designed to help Canadians invest for the future. While TFSAs are very useful for building wealth towards retirement, the rules for these accounts are different than those for RRSPs. These differences can make TFSAs very useful for short- and long-term spending goals, such as family vacations, purchasing a new car or home renovations.
How it works
Contributions: Canadians 18 and older can contribute annually to their TFSA. The contribution limit is set annually and is $6,000 for 2020. The limit increases periodically, based on inflation and rounded to the nearest $500. Unlike RRSP contributions, TFSA contributions are not deductible for income tax purposes. But any investment income earned within a TFSA is tax free. As with RRSPs, unused contribution amounts can be carried forward to future years.
Withdrawals: You can withdraw any amount from a TFSA at any time without paying tax. You can also put that money back into your TFSA, but you must wait until the next calendar year if you’ve contributed the maximum amount.