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Tax Free Savings Account (TFSA)

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The Tax-Free Savings Account (TFSA) program was introduced in 2009 and is quickly becoming popular with individuals aged 18 or older with a valid social insurance number to set money aside throughout their lifetime.  Contributions to a TFSA are not deductible for income tax purposes.  However, what is significant about this account is any amount contributed as well as any income earned including interest, dividends or capital gains is generally tax-free, even when it is withdrawn.  Administrative or other fees in relation to TFSA and any interest or money borrowed to contribute to a TFSA are not deductible.  The TFSA is particularly well-suited for long-term investment strategies and should not be used for day trading.  We recommend regular contribution and usage of the TFSA in conjunction with a diversified retirement portfolio strategy.

TFSA contribution rules, TFSA contribution limites, TFSA withdrawals

For Canadian investors and savers, it’s always some of the best news to come each year: the annual increase in the contribution limit for Tax-Free Savings Accounts (TFSA).  This current limit means someone who has never contributed to a TFSA and was old enough to have one since its inception will have a cumulative contribution room of $81,500 as of Jan 1, 2022.


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

Starting in 2009, TFSA contribution room accumulates every year, if at any time in the calendar year you are 18 years of age or older and a resident of Canada.

Only contributions made under a valid social insurance number are accepted as TFSA contributions.

Annual LimitCumulative Limit


Be aware of these rules and restrictions:

  • You can contribute up to your TFSA contribution room. A tax applies to all contributions exceeding your TFSA contribution room
  • Withdrawals will be added to your TFSA contribution room at the beginning of the following year
  • You can replace the amount of the withdrawal in the same year only if you have available TFSA contribution room
  • Direct transfers must be completed by your financial institution

Depending on the type of investment held in your TFSA, you can generally withdraw any amount from the TFSA at any time.  Withdrawing funds from your TFSA does not reduce the total amount of contributions you have already made for the year.

Withdrawals, excluding qualifying transfers and specified distributions, made from your TFSA in the year will only be added back to your TFSA contribution room at the beginning of the following year.

If you decide to replace or re-contribute all or a portion of your withdrawals into your TFSA in the same year, you can only do so if you have available TFSA contribution room. If you re-contribute but do not have contribution room, you will have over-contributed to your TFSA in the year.  You will be subject to a tax equal to 1% of the highest excess TFSA amount in the month, for each month that the excess amount remains in your account.

For more information on withdrawing amounts from your TFSA, contact your TFSA issuer.

Transfers between your own TFSAs and those completed upon the breakdown of a marriage or common-law partnership are considered qualifying transfers.  All qualifying transfers must be completed by a financial institution.

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