TFSAs: Frequently Asked Questions

What is a TFSA?

A TFSA is a registered account introduced in 2009. TFSAs allow for tax-free growth of investment income and capital gains from qualified investments. Unlike RRSPs, contributions to TFSAs are not tax-deductible, but withdrawals from your account are tax-free.

What can a TFSA be used for?

You can use a TFSA to save for many different short- and long-term goals, whether you’re saving for a car, a home, a renovation or retirement.

Who is eligible for a TFSA?

Any Canadian resident with a Social Insurance Number who has reached age of majority in their province can open a TFSA. There’s no age limit for TFSAs either – you aren’t required to collapse it at a certain age.

Note that the age of majority is 19 in Newfoundland and Labrador, New Brunswick, Nova Scotia, British Columbia, Northwest Territories, Yukon and Nunavut. Contribution room starts at age 18, however, regardless of your province of residence. So if you’re a resident of Newfoundland, you can still contribute the same amount as a resident of Ontario – you just need to wait until age 19 to open the account.

What investment choices are available for TFSAs?

Like most investment accounts, you can hold stocks, options, exchange-traded funds (ETFs), mutual funds, bonds and guaranteed investment certificates (GICs) in a TFSA, so long as they are qualified investments.

If you choose to hold foreign investments in your TFSA, many governments — including the U.S. — apply a non-resident withholding tax to the foreign source income received. Withholding taxes are unrecoverable, and may reduce your potential returns. For example, the IRS imposes a 30% withholding tax to dividends paid on U.S. stocks – which can be reduced to 15% by submitting a W-8BEN or W-9 form. Check with your tax advisor to learn more.

What investment options are not available for TFSAs?

The Canada Revenue Agency only allows qualified investments in a TFSA. Generally, if a security trades on at least one exchange that's considered a Designated Stock Exchange by Canada's Finance Department, it will be recognized as a qualified investment. Among those exchanges – of which there are around 47 – are the NASDAQ, NYSE, LSE, TSX and more. Holding non-qualified investments can have tax consequences and may result in penalties levied by the CRA.

Is the TFSA margin-eligible?

A TFSA cannot be margined and short selling is not permitted.

How is a TFSA different from an RRSP?

• Withdrawals from a TFSA are tax-free and do not result in lost contribution room
• Contributions to a TFSA are not tax-deductible, as after-tax dollars are contributed to the plan
• You don't need earned income to accumulate contribution room in a TFSA
• You don’t need to close the TFSA at the end of the year you turn 71
• You can give money to your spouse to contribute to a TFSA without being subject to CRA attribution rules

How much can I contribute each year?

Annual contribution limits are based on the following:

• Federal government-set annual contribution limits (subject to change):
• 2009 to 2012: $5,000
• 2013 and 2014: $5,500
• 2015: $10,000
• 2016 to 2018: $5,500
• 2019 to 2021: $6,000
• Any unused contribution room carried forward from previous years in which you were 18 or older
• The net of any withdrawals or re-contributions made in previous years

Visit the My Account section of the CRA website to learn about your specific TFSA contribution room.

Do I have to have a particular income level to take advantage of a TFSA?

There is no minimum or maximum income level. Every eligible Canadian resident accumulates contribution room annually, starting from 2009 once they turn 18 years old.

Do I still accumulate contribution room if I did not open my TFSA when it was first introduced in 2009?

Yes. As of 2021, for example, the TFSA cumulative limit (if you've never contributed and were 18 or older in 2009) is $75,500. This number grows every year, subject to the annual TFSA contribution limit set by the federal government.

If I don’t contribute the maximum one year, can I use my unused contribution room in a future year?

Yes. Your unused contribution room carries forward.

What happens if I over-contribute for the year?

Excess contributions will be subject to a tax of 1% per month, for each month that the excess amount remains in the account. Interest and capital gains earned on the excess may also be penalized.

To view your TFSA contribution room, including any excess contributions, visit the My Account for Individuals section of the CRA website.

Is there a lifetime contribution limit?

There is no lifetime limit on the amount of your contributions – you just need to stay within the maximum contribution limits for the years since 2009. So, if you are eligible and were 18 or older in 2009, your total maximum contribution for 2009 to 2021 is $75,500. This grows every year, subject to annual TFSA contribution limit changes by the federal government.

Can I withdraw the money I've contributed to my TFSA for any purpose?

Yes – any withdrawals you make in the current calendar year are added to your unused contribution room. You can re-contribute the amount of your withdrawal beginning in the next calendar year or later.

How often can I withdraw from my TFSA?

You can withdraw funds from a TFSA as often as you need. In your RBC Direct Investing account, you can use the online funds transfer tool to easily transfer cash to  your RBC Royal Bank account. Note that timing may depend on the type of investments you hold — for example, non-redeemable GICs may not have matured and proceeds from a sale need to be settled. RBC Direct Investing does not charge any fees to withdraw from a TFSA.

Are withdrawals subject to income tax?

No. Withdrawals are not considered income for tax purposes. They are tax-free and you don't lose your contribution room. There is also no impact to your federal income-tested benefits or credits like Old Age Security (OAS), Guaranteed Income Supplement (GIS) or the Age Credit.

If I withdraw money from my TFSA, can I re-contribute this withdrawn amount later on in the tax year?

Withdrawals you make in the current calendar year are added to your unused contribution room. Amounts can't be re-contributed until the following calendar year or later.

Can I contribute to my spouse or common-law partner's TFSA?

No. However, money you give to your spouse to contribute to his or her TFSA will not be subject to the CRA's income attribution rules.

If I give funds to my spouse or common-law partner to contribute to his or her TFSA, who will get the income — me or my spouse?

Your spouse is the TFSA account holder and the owner of the assets. He or she is entitled to any investment income and capital gains earned in the account.

Can I contribute assets in-kind from a non-registered account to my TFSA?

Yes. There may be tax implications. When you contribute qualified assets in-kind, you’re considered to have disposed of the assets at fair market value (FMV). If the FMV is more than the cost of the property, you need to report the capital gain on your tax return. However, if the cost of the property is more than its FMV, you cannot claim the resulting capital loss. The amount of the contribution to your TFSA will be equal to the FMV of the property.

• Note: If you choose to hold foreign investments in your TFSA, many governments — including the U.S. — apply a non-resident withholding tax to foreign source income. Withholding taxes are unrecoverable, and may reduce your potential returns. For example, the IRS imposes a 30% withholding tax to dividends paid on U.S. stocks – which can be reduced to 15% by submitting a W-8BEN or W-9 form. Check with your tax advisor to learn more.

Can I transfer assets in-kind to a TFSA from an RRSP without tax implications?

No. A TFSA and an RRSP differ in structure and you cannot transfer between them. If you wish to use assets (either cash or securities) from your RRSP to contribute to your TFSA, you must first withdraw the RRSP assets (subject to applicable withholding taxes), move the assets to a non-registered account, and then contribute to the TFSA. Speak to your tax advisor to make sure this is right for you.

Can I use losses within my TFSA to offset other capital gains?

No. You will not pay tax on the investment income and capital gains earned inside the TFSA. Because of this, you can’t use losses in the account to offset taxable capital gains outside of the TFSA.

Can I open a joint TFSA account?

No. As with most registered accounts, government rules permit only individual accounts.

Is interest on money borrowed to invest in my TFSA tax-deductible?

No, interest on money borrowed to invest in a TFSA is not tax-deductible.

How do I open a TFSA?

Visit the Open New Accounts page and follow the instructions for completing an application online.

Are there any maintenance fees for TFSAs?

There is no maintenance fee if your combined assets are $15,000 or more across all of your RBC Direct Investing accounts. If your combined assets are under $15,000 across all of your RBC Direct Investing accounts, you will be charged one maintenance fee of $25 per quarter (split across all of your accounts).* However, there are a number of additional ways to have this fee waived. For full details please refer to Commissions & Fees. 

*Clients can open a maximum of 10 accounts for a combined maintenance fee of $25/quarter. Additional maintenance fees will apply if a client opens more than 10 accounts.

What fees and commissions apply to the TFSA? What's the interest rate?

TFSAs do not have withdrawal fees or minimum balance requirements. Standard fees and commissions apply to the TFSA, as they would to any other account. For more information, refer to the Commissions & Fees. The registered interest rate applies to TFSAs. See the Interest Rates page for more information.

Which investment minimums will the TFSA follow?

There are no minimums to hold in a TFSA account, but some products like GICs and mutual funds might have a minimum required investment amount.

Is there a U.S. side to a TFSA?

Yes, you can hold and settle trades in U.S. dollars in your TFSA. You can also contribute and withdraw in U.S. dollars if you have an RBC U.S. dollar bank account. In this case, it is the equivalent Canadian dollar value that is recorded for reporting the amounts to the CRA.

Am I required to complete a W-8BEN form (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting) even if I do not intend to trade in U.S. securities?

Yes.

Can I designate a beneficiary on my TFSA?

You can designate a successor holder or beneficiary in all provinces except Quebec, where the default designation is to one's estate unless otherwise indicated.

Can I hold multiple TFSAs?

Yes. You can hold multiple TFSAs with one or more financial institutions. It is up to you, however, to ensure that you remain within the contribution limits.

Can I use a TFSA to frequently trade securities and carry on a business?

No. TFSAs are registered accounts and should not be used to carry on a business. If a TFSA is “carrying on a business,” there may be taxes imposed by the CRA.

To learn more about TFSAs, check out Understanding Tax Free Savings Accounts (TFSAs).

The information provided on the Tax-Free Savings Account is based on what has been communicated by the Canadian government. Please visit the Canada Revenue Agency website for more information.

The information provided in this article is for general purposes only and does not constitute personal financial or tax advice. Please consult with your own professional advisor to discuss your specific financial and tax needs.