What is a TFSA?
A Tax-Free Savings Account (TFSA) is a versatile investment account where all gains are 100% tax-free. Unlike RRSPs, you don't get a tax deduction for contributions, but you never pay tax on growth or withdrawals.
Tax-Free Growth
All investment gains are tax-free forever
Tax-Free Withdrawals
Withdraw anytime without triggering taxes
Contribution Room Returns
Withdrawn amounts return as room next year
Flexible Use
Use for any goal: retirement, home, emergency fund
2026 Contribution Room
Annual Limit
New contribution room for 2026
Total cumulative room since 2009
Key Rules
Unused Room Accumulates
You never lose contribution room - it carries forward
Withdrawals Create Room
Withdrawn amounts return as room next January 1
Over-Contributions Penalized
1% per month tax on excess amounts
What Can You Hold in a TFSA?
Stocks & ETFs
- ✓ Canadian stocks (TSX)
- ✓ U.S. stocks (NYSE, NASDAQ)
- ✓ ETFs (equity, bond, sector)
- ✓ Index funds
Fixed Income
- ✓ GICs (term deposits)
- ✓ Government bonds
- ✓ Corporate bonds
- ✓ High-interest savings
Other Investments
- ✓ Mutual funds
- ✓ REITs
- ✓ Options (if qualified)
- ✗ Direct real estate
Smart TFSA Strategies
1. Growth Over Income
Focus on capital gains and growth stocks in your TFSA since gains are tax-free. Save dividend-paying investments for non-registered accounts.
2. U.S. Stocks - Beware Withholding Tax
U.S. dividends in TFSAs are subject to 15% U.S. withholding tax (unlike RRSPs). Consider holding U.S. dividend stocks in RRSPs instead.
3. Emergency Fund
TFSAs are perfect for emergency funds because you can withdraw anytime tax-free and the room returns next year.
4. Max Out Early Each Year
Contribute your full $7,000 on January 1st to maximize compounding time throughout the year.