Tax-Free Savings Account (TFSA)

Imagine you want to save money — maybe for a vacation, a new car, or just for the future. With a Tax-Free Savings Account (TFSA), you can put your money in, watch it grow and take it out whenever you want, all without paying any tax.

Before TFSAs existed, saving and investing could be tricky. You had to keep track of taxes on any money you earned from investments, which made things complicated and less appealing. Some people just stuck with regular savings accounts because it was easier.

But now, with a TFSA, saving and investing are simple. You don’t have to worry about taxes or paperwork. Whether you’re saving for something special or investing for long-term goals, the TFSA makes it easy to let your money work for you. It’s not just for saving — it’s for investing too.

What's a Tax-Free Savings Account (TFSA)?

A TFSA is a registered savings vehicle that helps you grow your money faster because you don’t pay taxes on the interest or investment income you earn. The plan can include a mix of investments including stocks, ETFs, mutual funds, GICs and more. The TFSA is not just for saving. It's now an important part of every investor's toolkit, offering a potential maximum contribution room of over $100,000 in 2025, even if you haven't contributed to your TFSA in previous years.

Who’s eligible for a TFSA?

To open a TFSA, you must live in Canada, have a valid Social Insurance Number and have reached the age of majority — 18 or 19 years of age, depending on where you live.¹ Contribution room accumulates beginning in the year in which you turn 18, and each year's contribution room is based on being a resident of Canada for tax purposes.

What investments can you hold in a self-directed TFSA?

Unlike a cash TFSA, where your investments might be limited to standard savings options like cash or GICs, a self-directed TFSA allows you to choose from a broad range of investment options, including:

Stocks: Invest in individual company shares for potential capital growth, as well as dividend income.
Bonds: Include government or corporate bonds to add a fixed-income component to your portfolio.
Exchange-Traded Funds (ETFs): ETFs give you access to a wide range of investments in a single trade — like a mutual fund — which you can buy or sell on a stock exchange during market hours, like a stock.
Mutual Funds: Invest in professionally managed funds that hold a broad mix of investments in a single fund, like the U.S. stock market or the Canadian bond market.
GICs (Guaranteed Investment Certificates): Low-risk, fixed-term investments with guaranteed returns.

Benefits of a Self-Directed TFSA

You’re in charge: Manage your investments based on your financial goals, risk tolerance, and investment strategy.
Tax-free Growth: Any income, dividends, or capital gains generated within the account are not subject to taxes, allowing your investments to grow more efficiently.
Flexibility: You can adjust your investments at any time, making it easy to adapt your portfolio to changing market conditions or personal financial needs.

Who can use a Self-Directed TFSA?

A self-Directed TFSA offers flexibility for investors of all experience levels. Whether you’re a beginner looking to start with simple investments or an experienced investor seeking to diversify your portfolio, a Self-Directed TFSA allows you to manage your investments at your own pace.

You can begin with straightforward investments that you’re comfortable with, and as you gain confidence and knowledge, you can gradually expand and diversify. This flexibility empowers you to pursue your financial goals in a way that suits your comfort level and evolving expertise.

What to watch out for with a TFSA

Contribution room is per person, not per account. You can have multiple TFSA accounts at multiple financial institutions, but it doesn’t increase your contribution room.

It’s your responsibility to keep track of your TFSA contribution room so you don’t overcontribute.³ One way to check your contribution room is to sign on or register for an online account with the Canada Revenue Agency (CRA) Opens a new window..

The CRA tracks all of your TFSA contributions and updates your contribution room at the beginning of every calendar year until April or later, when CRA has received prior-year TFSA information from all financial institutions.

The TFSA dollar limit gets set every year. For example, in 2024, it’s $7,000. Remember that this limit is not the same as your maximum contribution room.
If you can’t contribute up to the limit in any given year, no problem: you can carry it forward. This means if you’ve never had a TFSA, were at least 18 in 2009 and have been a Canadian resident since then, you can contribute up to $102,000 in 2025 because of the unused contribution room you’ve accumulated.
You can withdraw your money for any reason, at any time, tax-free. Plus, you can add the withdrawal amount back into your TFSA the next calendar year or in later years.⁴

TFSA annual contribution limits

Here are the annual contribution limits for the TFSA, starting from 2009:

Year	Amount	Total
2009	$5,000	$5,000
2010	$5,000	$10,000
2011	$5,000	$15,000
2012	$5,000	$20,000
2013	$5,500	$25,500
2014	$5,500	$31,000
2015	$10,000	$41,000
2016	$5,500	$46,500
2017	$5,500	$52,000
2018	$5,500	$57,500
2019	$6,000	$63,500
2020	$6,000	$69,500
2021	$6,000	$75,500
2022	$6,000	$81,500
2023	$6,500	$88,000
2024	$7,000	$95,000
2025	$7,000	$102,000
2026	$7,000	$109,000

The TFSA has become an important part of an investor's toolkit. While the cumulative contribution limit for eligible Canadians was just $10,000 in 2010, it now stands at over $100,000. That's enough to make a difference for major life goals, like saving for home ownership or retirement.

TFSA: Your flexible friend

The TFSA is your flexible friend, complementing other more focused accounts like the FHSA for home ownership and the RRSP for retirement. One of the biggest advantages of a TFSA is its flexibility. You can withdraw funds at any time, for any reason, without incurring taxes. Plus, any withdrawn amounts can be added back to your TFSA in the following year or any future year, ensuring your contribution room is never permanently reduced.

For self-directed investors, a TFSA isn’t just a tax-efficient account — it’s a powerful tool to take control of your investment strategy. With a self-directed TFSA, you have the flexibility to choose your own investments, from stocks and ETFs to bonds and GICs, and adjust your approach as your financial goals change. Whether you’re planning for retirement, saving for a big purchase or aiming for long-term growth, a self-directed TFSA gives you the freedom and control to build your wealth, your way — all while enjoying tax-free growth.

Sources:

¹ The age of majority is 19 in British Columbia, Nova Scotia, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nunavut and Yukon. It’s 18 in the other 6 provinces.

² Withdrawals made in the previous year does not include withdrawals made to correct over-contributions.

³ If you overcontribute to your TFSA, the extra amount will be taxed at 1% for every month it’s in your TFSA.

⁴ This does not apply to withdrawals to correct over-contributions.