Investing » TFSA

TFSA basics: Contributions and withdrawals

In 2009, the Tax Free Savings Accounts (TFSA) was introduced and based on what I see as a financial educator, they are really gaining momentum. Despite the growing popularity, I continue to meet people who don’t fully understand them or worse yet, know nothing about them. 

Let’s start with a few of the basics of the TFSA:

  • You have to be a Canadian resident
  • You must be age 18 or older
  • Contribution limits
    • From 2009 to 2012, you could contribute up to $5,000 per year to a TFSA.
    • For 2013 and 2014, the annual limit was increased to $5500.
    • For 2015, the limit was again increased to $10,000
    • From 2016 to 2018, the limit went back to $5500 per year
    • From 2019 to 2022, the limit increased to $6000 per year
    • For 2023, the limit was increased to $6500
    • The total cumulative limit is $88,000 (assuming you were age of 18 or older in 2009)
YearAnnual LimitCumulative Limit
  • Unlike RRSPs, contributions are not tax-deductible
  • Unlike the RRSP, you can continue to contribute to a TFSA even after the age of 71.  There is no upper limit on when you can contribute to TFSA
  • Investment income earned in a TFSA is tax-free.
  • Withdrawals from a TFSA are tax-free.
  • Any withdrawals from a TFSA can be added back but you should wait till the following calendar year to avoid penalties
  • Just like with the RRSP, unused TFSA contribution room is carried forward and accumulates in future years.

More important details about Tax Free Savings Accounts

Contribution rules

Since the introduction of the TFSA, lots of Canadians have been hit with TFSA over-contribution penalties because of a misunderstanding of some contribution rules.

Related article: Problems with over-contributing to TFSAs

Putting more than that will attract penalties. If you have not utilized your past contribution room, it carries forward. For example, in 2023, everyone (assuming you were 18 or over in 2009), can contribute up to $88,000:

If you make withdrawals from the TFSA, the full amount of withdrawals can be put back into the TFSA in future years but you should wait till the following calendar year for that amount to be added back to your contribution room. Re-contributing in the same year may result in an over-contribution amount which would be subject to a penalty tax.

Investing options

One common misunderstanding is how many people think the Tax Free Savings Account (TFSA) is just a savings account. After all, the ‘SA’ in TFSA stands for ‘savings account’.

With the money in the TFSA, you can choose from a wide range of investment options such as mutual funds, individual stocks, Guaranteed Investment Certificates (GICs), bonds and savings accounts. Given the wide range of options, maybe the government should have called them Tax Free Investment Accounts (TFIA) instead. Take the time to explore your TFSA investment options to determine your best investment strategy.

Related article: How to invest your TFSA

What HAPPENS to your TFSA when you die

With a TFSA, you can name any beneficiary to receive the money when you pass away.  If you have a spouse, the spouse can be a successor annuitant which allows the surviving spouse to not only receive the money tax free but also maintain the TFSA in a TAX Free environment.  For more information:

Related article:  TFSA Beneficiary rules

The TFSA has universal appeal

Since the TFSA is still in an infancy stage of evolution, we have yet to see the power and the opportunities for these accounts. They can be used by so many different people in different ways. They can be used as longer term investment accounts or simply for saving to spend. They have applications for retirement and estate planning. They can be used for their tax benefits. For some, they will replace RRSPs but for others, the TFSA or RRSP debate will be less definitive.

Related Article: The new debate: TFSA or RRSP

No matter who you are, you should incorporate TFSAs into your financial plan. There are very few financial vehicles that have so many benefits with very little downside to such a broad range of people. One exception is when you have significant debts, especially high interest debt.

Related article: TFSA or paying down debt? Which is better?


  1. Sophie

    Hi Jim, I had withdrawal $15,000 from my TFSA to put into my RRSP. Now I want to conitnue contributing to my TFSA as usual $800.00/Month and do it again at a later time, what do you think?

    Thank you your openion will be appreciate it.


  2. Chris

    I make a high income, significantly in the highest tax brackets so I max my RRSP and some TFSA. My wife makes a small income so does not contribute to RRSP anymore. If she withdraws from her older RRSP to fund a TFSA does that RRSP withdraw count as income in my tax bracket or hers?

  3. Frederick Hooper

    Apologize for being picky Jim or maybe I just don’t get it but in what universe does 5000*4 + 5500*2 + 10000 = 36500 ?


  4. Peter

    I have shares in my TFSA that I would like to give to my children to put them in their savings accounts. Is that possible under the TFSA rules?

  5. Cindy H

    Be careful of these if you also have to submit USA income tax.
    If so, it would be an idea to do some research. My accountant SiL specializes in US taxes with a large firm, and strongly suggested I close my TFSA because the US income tax system.

  6. Jess @ Best Credit Cards Canada

    I feel like I am pretty up-to-date on TFSAs (and have actively been using and maxing mine out since 2009) but this is the best article I have read about them so far. I love your breakdown of info, this is a really great reminder!

  7. Mark

    I agree with Frederick. There seems to be a miscalculation in the article. If we are referencing the 2015 tax year the maximum contribution room would be $41,000.00 ($5,000.00 – 2009; $5,000.00 – 2010; $5,000.00 – 2011; $5,00.00 – 2012; $5,500 – 2013; $5,500.00 – 2014 and $10,000.00 for 2015). If we are talking about 2016, the Liberal government lowered the maximum contribution back down to $5,500 for 2016. Therefore the maximum contribution for 2016 would now be $46,500.00. Jim since this is a financial advice article can I recommend that the typo get corrected and the article be reposted

    Regards, Mark

  8. Mark

    As a follow up to my earlier comment the maximums assume that no previous TFSA contributions have ever been made. However your annual TFSA room is calculated taking into consideration any past years contributions and withdrawals.

    Let’s say you contributed the maximums for 2009, 2010 and 2011 for a total of $15,000.00 in one TFSA account and it had grown to $16,200.00 as of Dec 31,2015.
    Let’s also assume that you have contributed the allowed maximums for 2012, 2013 and 2014. ($16,000) in another TFSA account but you have not yet contributed anything for 2015.
    If you withdraw the $16,200.00 that had accumulated in the first TFSA account mentioned above by Dec 31,2015 and wait until the first business day of 2016 (this is extremely important if you do not want to trigger an over contribution) to reinvest it, your new TFSA room would be $31,700.00. That is $5,500.00 – 2016 max + $10,000 – 2015 max + $16,200 – the amount that you had withdrawn on Dec 31 of the previous year. Hi Jim please correct me if I am wrong as I do not want to mislead your readers. Keep up the good work. I really enjoyed your article regarding the requirement to contribute the maximum to CPP for at least 39 of the 47 years between the ages of 18 and 65 if you expect to receive the maximum CPP pension. I was blissfully ignorant of his fact as I have already contributed the maximum for 41 years. But this is extremely important information considering the rise in the number of people getting Working Notice or outright severance packages.

    Regards, Mark

  9. Bonnie

    Jim is a “Fee Only” advisor, so he will not response any of your comment. FYI.

  10. Jerry

    I think the article is good but it is missing the phone number, information you have to provide and the earliest date to access the IVR system to find out exactly what your TSFA limit available is including the current years numbers. I think it’s March.

  11. D. Murray Armitage

    My interest is in the ability to inherit a spouse’s TFSA without tax implications. Does this have any impact on your personal cumulative contribution total?

  12. sam

    Jim if you make blog posts you need to reply to people.

  13. Richard

    Ok, I have a TFSA. It’s close to max. But I still have $7800 contribution room. Does the money I earned from mutual funds count toward the max limit? Or can I still contribute that 7800 and be over the max limit due to investment increase? Thanks.

    • Stephanie

      Investment increase does not affect your contribution room. On the flip side, if your investment went down you don’t gain that room.

      If you are maxed at 75,500 contribution for 2021 but your account value was actually 80k due to growth, if you withdraw the entire 80k this year, next year you could put in 80k plus the new contribution for 2022.

  14. Eleanor

    Have invested in RRSP’s all my working life & spousal RRSP’s. And when TFSA arrived I contributed & used it as a savings account that was easy to withdraw from, & recontribute to.
    Now retired & cashing in RRSP’s instead I am appalled the amount of tax I have paid on the ‘same’ money. When it was earned, when I buy goods & services, and again at withdrawal – it’s added to my income so I’m taxed in a higher bracket.
    I don’t mind paying my fair share of taxes but I wish everyone, especially the rich, would.

    • Doug Runchey

      Hi Eleanor – You appear to have forgotten that you got a tax refund when you made your RRSP contribution, which means that you didn’t effectively pay any tax on it when you earned it. I would agree though that you pay tax when you withdraw it and when you spend it. If you’re in a higher tax bracket when you’re withdrawing it than you were when you contributed to it, you probably should never have made the contribution in the first place.

  15. Marg

    To clarify, can a non-resident Canadian citizen contribute to a TFSA?

    • Sonny hoang

      Hello Jim
      I know with rrsp, they have self directed rrsp in order to buy stocks and mutual fund. With tax free account do they have the same program?
      What is the name of this account, does the bank adminish this acc?
      Thank you

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