Ads keep this website free for you. does not research or endorse any product or service appearing in ads on this site.  Before making a major financial decision you  should consult a qualified professional.

Canadian Tax and
Financial Information Home

What's New

Links & Resources

Site Map

Need an accounting, tax or financial advisor? Look in our Directory.  Use above search box to easily find your topic!   Stay Connected with!


Home  ->  Financial Planning -> Tax-Free Savings Accounts (TFSAs)

Tax-Free Savings Accounts (TFSAs)

Income Tax Act S. 146.2, 207.01 to 207.07

Tax-free savings accounts are available for Canadian residents who have reached the age of majority (18 or 19) in their province or territory. When the age of majority in the province or territory is 19, TFSA contribution room still accumulates from age 18.

There is no deadline for contributions to a TFSA, as the unused contribution room is carried forward into the next year.  However, a withdrawal in any year increases the TFSA room in the following calendar year.  Thus, if you are thinking of making a withdrawal close to year end, make sure it is done by December 31st, in order to have the withdrawal amount added back to the TFSA room sooner.

In a tax-free savings account:

bullet all investment income (interest, dividends, trust distributions and capital gains) will accumulate tax-free
bullet contributions are not tax-deductible
bullet withdrawals are not taxable
bullet capital losses are not tax-deductible
bullet dividends will not be eligible for the dividend tax credit

Borrowing to Invest in a TFSA

bullet Interest on money borrowed to invest in a TFSA is not tax deductible.
bullet A TFSA can be used as security for a loan.
bullet According to bank representatives, a TFSA cannot be used to provide margin for linked margin brokerage accounts, although this is not disallowed by the Income Tax Act.
bullet If you wish to use your TFSA to increase your margin, you can borrow against the TFSA and put the money into your margin account.  The interest on the debt would be tax deductible.

TFSA Technical Changes

On October 16, 2009 the Minister of Finance announced amendments to the Income Tax Act to strengthen the rules applicable to Tax-Free Savings Accounts.  The amendments apply to transactions which occur after October 16, 2009.  The draft legislation and explanatory notes were released by the Department of Finance on April 30, 2010. The amendments were included in Bill C-47, which became law in December 2010.  These amendments:

bullet Make income from deliberate overcontributions and prohibited investments subject to existing anti-avoidance rules in the Income Tax Act
bullet Make income attributable to non-qualified investments taxable at regular income tax rates.
bullet Ensure that withdrawals of deliberate overcontributions, prohibited investments, non-qualified investments or amounts attributable to swap transactions, or of related investment income, from a TFSA do not create additional TFSA contribution room.
bullet Prohibit asset transfer transactions (swap transactions) between TFSAs and other accounts.

Information on the changes is included in our TFSA articles below.

What is better - TFSA or RRSP?

TFSA Contribution Rules and Limits / Leaving Canada

Don't Overcontribute!  <- very important!!!  Read this so you know how it works.

Unused Contribution Room

TFSA Investments - qualified, non-qualified, and prohibited

TFSA Withdrawals

Asset Transfer (Swap) Transactions

Taxes Payable re TFSA - Frequent trading can be a problem!

Marital Breakdown

Death of the TFSA Holder Resources

TFSA vs RRSP Calculator - to help you decide which type of account is better for you.

Borrow to Invest - and Calculator

Are Your Investment Gains and Losses Capital or Income?

Other Resources

TFSA Maximizer Schemes - when interest expense can be deemed unreasonable and disallowed, including the use of a mortgage investment companies (MIC), by Jamie Golombek, CPA, CA, CFP, CLU, TEP. See related CRA warning below.

Canada Revenue Agency (CRA) Resources

Income Tax Folio S3-F10-C1, Qualified Investments - RRSPs, RESPs, RRIFs, RDSPs and TFSAs - Tax consequences - carrying on a business

Warning: Watch Out For TFSA Maximizer Schemes - including the use of a special use mortgage investment company (MIC)

RC4466 - Tax-Free Savings Account (TFSA), Guide for Individuals - lots of detailed information, and examples.

RC343 Worksheet - TFSA Contribution Room - use this worksheet to calculate your TFSA contribution room for the current year

TFSA information for Registered Plans Administrators

Department of Finance Resources

Budget 2008 tax-free savings account information

Tax Tips:

Everyone should have a tax-free savings account!

Make sure you don't overcontribute - see our article on this!

Revised: April 05, 2024


Copyright © 2002 Boat Harbour Investments Ltd. All Rights Reserved.  See Reproduction of information from

Facebook  | Twitter  |  See What’s New, stay connected with by RSS or Email
The information on this site is not intended to be a substitute for professional advice.  Each person's situation differs, and a professional advisor can assist you in using the information on this web site to your best advantage. 
Please see our legal disclaimer regarding the use of information on our site, and our Privacy Policy regarding information that may be collected from visitors to our site.