Tax-Free Savings Account
TFSA
A registered account where investment income and withdrawals are completely tax-free for Canadian residents.
What is a TFSA?
A Tax-Free Savings Account (TFSA) is a registered savings account available to Canadian residents aged 18 and older with a valid SIN. All investment income earned within the account — including interest, dividends, and capital gains — is completely tax-free. Withdrawals are also tax-free and do not affect your eligibility for government benefits.
Why It Matters for Newcomers
The TFSA is one of the most powerful savings tools available in Canada. As a newcomer, you start accumulating TFSA contribution room from the year you become a Canadian resident for tax purposes and receive a SIN. This room accumulates annually even if you do not open an account right away.
Contribution Limits
The annual TFSA contribution limit is set by the government each year (recently $7,000). Your contribution room starts accumulating from the year you turned 18 and became a Canadian resident. Unused room carries forward. Over-contributing results in a 1% monthly penalty tax.
Quick Tip
Open a TFSA as soon as you have your SIN, even if you can only contribute a small amount initially. You can hold various investments inside a TFSA including savings deposits, GICs, mutual funds, stocks, and bonds. Start building your tax-free savings from day one.