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February 15, 2009

Tax-Free Savings Account (TFSA) ( Canada)

Your Guide



A savings vehicle which allows Canadian residents to save for miscellaneous expenses on a tax-free basis. The TFSA is available to all individuals regardless of income levels, providing the individual is at least 18-years old.

The maximum amount that can be added to a TFSA is $5,000 each year. However, if an individual contributes less than $5,000 in any year, the unused portion of the $5,000 limit can be applied in subsequent years.

TFSAs are effective for years beginning 2009


Referring Cite

Canadian Department of Finance

Additional Helpful Information

  • Contributions are flexible and discretionary, which means individuals can contribute from zero dollars to $5,000 for any year
  • Contributions are not deductible, unlike contributions to a Registered Retirement Savings Plan (RRSP) which are deductible and result in a reduction of the individual’s taxable income.
  • Earnings accumulate on a tax-free basis. This is unlike an RRSP, where earnings are tax-deferred, and taxable as ordinary income when withdrawn.
  • Withdrawals can be made at anytime and for any purpose. This is unlike an RRSP, for which the funds are intended to be used for retirement purposes
  • Individuals who make withdrawals from their TFSAs can return those funds to their accounts. These returned funds do not affect their $5,000 TFSA annual limit.
  • Spousal TFSA contributions are permitted, i.e. an individual can make contributions to a TFSA on behalf of his/her spouse. Individuals can also make contributions to the accounts of their common-law partners.
  • TFSA balances can be transferred to the TFSA of a surviving spouse , ( naturally) after the death of the TFSA owner.
  • TFSA contributions and withdrawals do not affect an individual’s  federal income-tested benefits and credits.
  • There is no maximum age limit for adding to the TFSA
  • Unlike RRSPs where individuals are required to begin withdrawals at age 71, individuals need not withdraw the TFSA balance unless they want to do so.

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.


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