A Complete Guide to TFSA

Canadian residents aged 18 and older with a Social Insurance Number (SIN) can open a TFSA. However, it's worth noting that in Newfoundland and Labrador, New Brunswick, Nova Scotia, British Columbia, Northwest Territories, Yukon, and Nunavut, the age of majority is 19, which may delay the opening of a TFSA in these regions. Despite this, the accumulation of your contribution room still begins when you turn 18.

[To be eligible for a TFSA, you must be a Canadian resident, 18 years or older, and possess a Social Insurance Number (SIN).]

Beyond its tax advantages, what sets the TFSA apart is its flexibility. You can hold a variety of qualified investments within your account at any time, without paying taxes, including Guaranteed Investment Certificates (GICs), mutual funds, stocks, bonds, and even simple cash savings.

[A TFSA is a flexible investment account that can accommodate a range of eligible investments, such as Guaranteed Investment Certificates (GICs), mutual funds, stocks and cash.]

TFSA has a unique feature, which is the ability to carry forward unused contribution room. What it means is that if you were 18 or older and a Canadian resident since the TFSA's introduction in 2009 and never contributed, you’d still have contributed and accumulated a significant amount – though the exact figure would depend on the annual limits from 2009 to 2025.

[If you were a minimum of 18 when the TFSA was first introduced in 2009, you can contribute up to $102,000 in 2025.]

If you deposit more than your contribution room, you'll face a penalty. This over-contribution incurs a 1% monthly tax on the excess amount. We’ll talk further about withdrawals in TFSA, but imagine you over-contribute, withdraw, and then re-contribute in the same year, you could unintentionally exceed your limit again, leading to additional penalties.

Always make sure that you're aware of your contribution room, which is specified annually by the Canadian Revenue Agency (CRA). For 2025, it's $7,000. More specifics can be found on the CRA's site or reach out to our team.

[Over-contributions in TFSAs are subject to a 1% penalty tax per month.]

If you move out of Canada, you can keep your TFSA and continue to benefit from the tax exemption on investment income and withdrawals. While the Canadian government will not tax your TFSA earnings, the country where you have become a resident might, so it’s important to understand the tax laws of your new country of residence.

Once you become a non-resident of Canada, you cannot make contributions to your TFSA and your contribution room will not increase. If you decide to make a contribution to your TFSA while being a non-resident, you'll be subject to a 1% tax for each month the contribution remains in the account.

[When someone moves out of Canada, their TFSA earnings will continue to be tax-free. However, they cannot make contributions without getting charged a 1% tax on the amount they put in their TFSA.]