Personal Finance

Tax Free Savings Account (TFSA)

The Canadian government recently announced a new type of tax-free savings account (TFSA) available to Canadians which is similar to the Roth IRA account available to Americans. Here are some of the details:

What is the TFSA?

A type of account where you make contributions but don’t get any income tax refund. While the money is in the account there are no taxes applied to any kind of earnings such as interest, dividends, capitals gains. Any withdrawals from the account are not taxable and won’t count against any government programs ie GIS, OAS.

How does the TFSA work?

  • You can contribute $5000 per year to this account for the years 2009 to 2012 and $5,500 for year 2013 and beyond.
  • The contribution room is carried forward.
  • No taxes on any earnings.
  • No taxes on any withdrawals.
  • When you withdraw money from the account, the contribution room available gets increased by the amount of the withdrawal – please note that this new contribution room is not available until the following calendar year.

When can I open up a TFSA account?

January 2, 2009 was the first day you could deposit funds into a TFSA.  Most institutions allowed customers to set up accounts prior to this date however.

Why do I want to open a TFSA account?

Any money that you might be saving for emergencies or upcoming large purchases will have a constant tax drag in an non-registered account. With the TFSA, this tax drag no longer exists so you will end up with more money for your purchase or emergency.  Here are some more benefits of the Canadian tax free savings account.

More information on the TFSA

Tax Free Savings Account (TFSA) Basic information for Canadians

TFSA contribution limits

TFSA Over-Contribution Penalty Fix

Tax Free Savings Account refresher for Canada

ING offers TFSA refresher for Canadians

Using the Tax Free Savings Account (TFSA) for Canadians as an emergency fund

24 replies on “Tax Free Savings Account (TFSA)”

Thanks for the link and the list of other articles on the TFSA. By the way in the government documents it states 2009 will the be the start of these accounts. So that should give us some time to debate these things to death before using them!


Hi Mike,

Thanks for the CMT link as well!

The TFSA is a good little vehicle for saving a mortgage downpayment. It’s nice that it works for non-first-time homebuyers as well (unlike the Home Buyers Plan).

Have a wonderful day!

Thanks for the response, I’ve been checking around and so far with looking at a few bank sites and some phone calls to credit unions none of them are expecting to be charging any fees.

Mike, do you know how many years the contribution room is carried forward? For instance, I am a Canadian citizen working overseas as a non-resident, and therefore I don’t pay income tax at all. But if I decide to renew my residency several years in the future, will I have several years worth of contribution room saved up?

For example, I come back to Canada in 2013, will I then have $20,000 (4 years) worth of contribution space in my TFSA?


I’m looking at opening an investment TFSA. Was thinking of opening up an account with RBC (because I bank there). Can you suggest any other financial institutions that may have a better program?



Shelly, I think pretty much any other financial institution is probably a better choice than RBC. Ok, maybe they aren’t that bad.

The problem with RBC is electronic access which is limited and fees. Their trading fees are a ripoff and although the TFSA has no account fees this year – that won’t last.

If you want to do stocks and ETFs then I suggest Questrade. If you want a savings account type of TFSA then ING or President’s Choice are pretty good because of no fees.

Great information…and I have $5000 in an ING TFSA.
I was wondering if there are consequences of taking some of the money out of my ING TFSA and opening another TFSA at a different institution that allows Stock purchases in the account rather than just cash? As I understand it, any increase in the value of the stock is tax free which COULD be quite substantial.

Hi Mike

Is the TFSA considered a taxible income for the given year? I am trying to figure a way to reduce my taxible income without putting anymore into my RRSP’s.

Any info is greatly appreciated


I guess what I mean to ask is, how does a TFSA effect our yearly taxes? Is it calculated on your tax return much the same way a RRSP is? I am looking for ways to reduce my net income at the end of the year without having to pump up my RRSP’s.

I had a savings account opened for me when I was 5 years old. Today as a parent, we tried to open a savings account for my 8 year old, who just started a paper route.
The hassle we have gone through over the past several weeks trying to open this account is too much – and we still don’t have what we wanted. First they said they needed a Birth Certificate. Now they say they need a Social Insurance Number.
Without a SIN for our 8 year old, we came home today with a non-interest bearing chequing account instead of a savings account. That’s a good way of teaching your child the value of saving?
This TFSA is only available to people 18 years and older??? Children younger than 18 have to get a SIN to open a savings account, which is subject to interest?
Who are these people we elect to make these ‘brilliant’ decisions?

No one should have to provide a SIN to a financial institution, unless and until their account earns a large amount of money – or never. It’s just a means of tracking people and double-taxing people.

Gibbons Family – Everyone needs a SIN sooner or later. Get the sin for the kid and move on with your life.

I don`t know why kids can`t have TFSAs but they would be a waste of time since most under 18s don`t pay much if any income taxes.

A TFSA should be available to anyone, not just those over 17. It just doesn’t make sense to allow an 18 year old to save money in a TFSA, but subject children under 18 to possible taxes.
When I was a chld, I didn’t need a SIN to open a savings account, Today’s children shouldn’t need one either.

When you were a child you probably didn`t have the carseats that your child used – things change.

You can try different banks to see if there are others that don`t require a SIN.

Hi Mike,

The information here is fantastic. Thank you so much.

I had a question and I was wondering whether you could help me with it. I have student loans at prime interest rate which I pay monthly and I am wondering whether it would be worth for me to open a TFSA account. The account sounds attractive since I plan to do some investing however should I be paying my student loan instead of putting money into this account?

I look forward to your answer.

-Trying to Save

Are there any charges if you make an initial deposit to a TFSA of $10,000 in one bank, which is more than the annual contribution limit of $5,000? How about if you have TFSA in other bank/banks?

Leave a Reply

Your email address will not be published. Required fields are marked *