Canada rules
TFSA (Tax-Free Savings Account)
Educational only, not financial advice.
A TFSA (Tax-Free Savings Account) is a registered Canadian investment account where investment growth is not taxed, and withdrawals can be made tax-free at any time.
Why it matters
- Contribution room accumulates annually based on limits set by the government, and unused room carries forward.
- Unlike an RRSP, TFSA contributions are not tax-deductible, but withdrawals are also not taxed as income.
- Withdrawn amounts are added back to your contribution room the following calendar year, adding flexibility.
Simple example
- Investment growth inside a TFSA — dividends, interest, and capital gains — is never taxed as long as it stays in the account or is withdrawn normally.
- A TFSA can be used for both short-term flexible savings and long-term retirement investing, unlike some other registered accounts.
How beginners use this
Use TFSA room for flexible or long-term investing; growth and withdrawals are generally tax-free. Compare with RRSP: TFSA vs RRSP.
Related terms
Learn more
2026 limits (from the CRA)
- TFSA: the 2026 TFSA dollar limit is $7,000. Unused room carries forward.
- RRSP: the 2026 RRSP dollar limit is $33,810. Your own deduction limit is 18% of the previous year's earned income up to that amount, plus unused room, minus pension adjustments. It is shown on your notice of assessment.
- FHSA: participation room in the first year you open an FHSA is $8,000.
Checked on canada.ca on October 14, 2026. Your own room depends on your history, so confirm it in CRA My Account.
U.S. counterpart
Try it
Sources
- Canada Revenue Agency: What is a TFSA
- Canada Revenue Agency: RRSP and TFSA dollar limits
- Canada Revenue Agency: First Home Savings Account (FHSA)
Reviewed by Greg Parsons. Links checked October 14, 2026. Educational only, not financial advice.