Heralded as the single most important personal savings vehicle since the introduction of the registered retirement savings plan (RRSP), the tax-free savings account (TFSA) allows you to earn tax-free investment income from eligible investments.

At a Glance

• Maximum contribution in 2021 – $75,500, indexed to inflation and rounded to the nearest $500 on a yearly basis
• Any unused contribution room is carried forward indefinitely
• TFSA contributions are not tax deductible
• Income, losses and capital gains from the TFSA are not included in taxable income

Eligibility

• Canadian residents ages 18 and older with a social insurance number
• You can have more than one TFSA, but the maximum allowable contribution amount applies to the total of all TFSA policies held
• Similar to other registered accounts, such as RRSPs, but spousal TFSAs are not allowed

Withdrawals

• Withdrawals increase contribution room in the following year
• Do not affect eligibility for federal income-tested benefits and credits such as Canada child tax benefit, working income tax benefit, goods and services tax (GST) credit and old age security benefits
• Not included in taxable income
• Withdrawals from the TFSA are not taxable
• Any time and for any purpose

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