Tax-Free Savings Account (TFSA), introduced by the Federal Government in 2009, allows you to save and invest money without having to pay tax on any of the interest it earns. Withdrawals from your account are also tax-free. 

How the TFSA works: 

  • Effective January 2016, Canadian residents, age 18 and older, can contribute up to $5,500 annually to a TFSA. 
  • Contribution to a TFSA will not be deductible for income tax purposes but investment income, including capital gains, earned in a TFSA will not be taxed, even when withdrawn.
  • Unused TFSA contribution room can be carried forward to future years.
  • The amount withdrawn can be put back in the TFSA at a later date without reducing your contribution room.
  • Neither income earned in a TFSA nor withdrawals will affect your eligibility for federal income-tested benefits and credits.
  • Contributions to a spouse’s TFSA will be allowed and TFSA assets can be transferred to a spouse upon death.
  • For more information go to: 

What are the benefits? 

  • Those who cannot contribute $5,000 from 2009 through 2012 will be able to carry forward their unused contribution room to future years, $5,500 from 2013 through 2014, $10,000 for 2015, and $5,500 for 2016 onward.
  • If you withdraw for the TFSA the full amount of the withdrawals can be put back into the TFSA in the future. 
  • Canadians can contribute to their spouse’s or common-law partner’s TFSA, depending on the spouse’s or partner’s available room. 
  • The TFSA will also provide seniors with a tax-free savings vehicle to meet ongoing savings needs, something they have only limited access to once they reach age 71 and are required to begin drawing down their registered retirement savings. 
  • There will be no impact on income-tested benefits. Neither income earned in a TFSA nor withdrawals will affect your eligibility for federal income-tested benefits and credits, such as the Guaranteed Income Supplement and Canada Child Tax Benefit. 

Maximum contribution Room Calculation 

  • The maximum contribution limit per year is $5,500.
  • When you contribute less than the maximum contribution limit, the difference is referred to as "unused contribution room" and is calculated as follows: 

- Unused contribution room from the prior year, PLUS
- Contribution limit for the current year, PLUS
- Withdrawals in the previous year


You contributed $2,700 in 2009, $5,000 in 2010, $5,000 in 2011, $3,000 in 2012, $5,500 in 2013, $5,500 in 2014, and $10,000 in 2015. In 2015, you make a $7,500 withdrawal, you could contribute $17,300 in 2016.

$2,300 (2009 unused contribution room)
$2,000 (2012 unused contribution room)
$7,500 (2014 withdrawal)
$5,500 (2016 contribution room)
$17,300 (2016 contribution limit)

Do not over contribute (excess contributions)An excess contribution occurs when you contribute more than your unused contribution room. You are responsible for ensuring your maximum contribution limit is not exceeded.

  • In the example above, you withdrew $7,500 in May 2013. If you had re-contributed that $7,500 in October 2013, you would have been in an excess contribution situation of $3,200. ($7,500 minus $4,300 [2009 + 2012 unused contribution room]).
  • An excess contribution will result in a penalty tax of 1% per month for each month that the excess contribution amount remains in the TFSA. 

In the above example, you would be subject to a penalty tax of $96 ($3,200 x 1% x 3 months [October, November and December]). 

The Government of Canada has created an online calculator  that you can use to calculate the amount you can save using a TFSA.

 How is a TFSA different from a Registered Retirement Savings Plan? 

  • Contributions to an RRSP are deductible and reduce your income for tax purposes. In contrast, your TFSA savings will not be deductible. 
  • Withdrawals from an RRSP are added to your income and taxed at current rates. Your TFSA withdrawals and growth within your account will not – they will be tax-free.

Visit a branch  or call us today at 1-800-563-3300 to find out how you can get started with your TFSA.

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