Tax Free Savings Account

How They Work

The TFSA is a registered savings account that allows taxpayers to earn investment income tax-free inside the account.

Contributions to the account are not deductible for tax purposes, and withdrawals of contributions and earnings from the account are not taxable.

Any individual (other than a trust) who is resident in Canada and 18 years of age or older is eligible to establish a TFSA.

Every year individuals can contribute up to their contribution room for the year. Your contribution room is derived from three amounts:

A TFSA is permitted to hold the same investments as a registered retirement savings plan. This includes mutual funds, GICs, fixed income investments and certain shares of small business corporations.

The CRA will determine TFSA contribution room (based on information provided by issuers) for each eligible individual who files an annual T1 individual income tax return.

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