Since 2009, tax-free savings accounts (TFSAs) have been available to Canadian citizens and residents as a long-term investment option.

If you haven’t yet opened up a TFSA, or you want to know more about whether or not you’re using the one you have to its fullest potential, we’ve put together a guide to everything you need to know about opening, contributing to, and investing with your TFSA.

What is a TFSA?

A TFSA is—as the name implies—a savings account where you can put money away tax-free.

This means that you don’t have to pay tax on any income you make off of interest, dividend income, or capital gains earned on the sale of investments made using your TFSA. 

For example, if you put $100 into your TFSA, and generated $5 of interest, that $5 is as good as cash—you don’t have to claim it on your tax returns.

What are the benefits of a TFSA?

Since any income you generate as a result of investments using your TFSA is tax-free, this type of savings account is a great opportunity to save money you would normally pay on your tax returns.

You also have a variety of investment options to choose from when deciding how to use your TFSA. If you’re looking for something less risky, you can purchase a guaranteed investment certificate (GIC) within your TFSA, which allows your savings to generate interest at a fixed or variable rate without the risk of losing any of your original investment. Those willing to take a bit more risk can use their TFSA to buy stocks or other investments.

What are the drawbacks of a TFSA?

While there really aren’t many arguments against having a TFSA, there are a few things to be aware of when deciding how to use the account.

Contribution limits

TFSAs have a cumulative contribution limit that is the sum of the dollar limit from each year since 2009 (or the year you turned 18, if you turned 18 after 2009). The yearly dollar limit varies by year, and an up-to-date list can be found on the CRA website.

As of 2022, someone who was 18 years or older in 2009 could have as much as $97,000 in their TFSA.

As such, if you have more money to put away than your TFSA contribution limit, you’ll want to have another savings account open as well. You will be penalized by the CRA if you over-contribute to your TFSA.

Losses cannot be offset

The same way any income generated from a TFSA is not taxable, any losses that result from an investment within a TFSA cannot be offset against your capital gains, meaning that if you lose money on an investment, it’s comparable to losing cash.

Limited allowance for short term investments

Your TFSA may not be the best avenue for day trading or other short-term investments that you are trading on a frequent basis. CRA may deem you to be in the business of day-trading.

How much can I contribute to my TFSA?

Your total contribution limit is the sum of the dollar limit from each year you were 18 years or older since 2009.

If you’re not sure how much room you currently have left in your TFSA, you can check using your MyCRA Account or by calling the Tax Information Phone Service (TIPS) at 1-800-267-6999.

Does the income generated in my TFSA count towards my contribution limit?

No. Only the money you contribute (at its value at the time of the contribution) counts towards your contribution limit. 

Can you withdraw from a TFSA without penalty?

Generally speaking, you will not be penalized for withdrawing money from your TFSA, should you need it. There may be exceptions depending on what type of investment you’re using the account for, so be sure to check with your financial advisor or institution if you’re unsure.

Withdrawals will affect your contribution room for the current calendar year, and you will not be able to recontribute the amount you withdraw until the next calendar year.

For example, if your total limit is $97,000 and you have contributed $27,000 (leaving you with room for $70,000), withdrawing $7,000 in 2022 will not increase your contribution room for the rest of the year. Your contribution room would remain at $70,000.

At the beginning of 2023, you would regain the $7,000 worth of contribution room.

Can you have more than one TFSA?

You can have different TFSAs open with different financial institutions, which may be beneficial depending on the different investment opportunities offered by different banks and credit unions. 

However, your total contribution limit will remain the same. For example, if your contribution limit is $97,000, you cannot have $97,000 in each TFSA—you can only contribute $97,000 total, although you may split it between your different accounts however you choose.


If you have any questions or concerns about how to maximize the use of your TFSA(s) for tax purposes, we’re happy to guide you in the right direction! Contact us any time.

This post has been prepared for general information purposes. It is not advice. The information presented may not fit your unique situation, please consult one of our trusted business advisors at RHN CPA for further clarification and interpretation of your circumstances.