A TFSA is a registered savings account where your money grows without tax

A Tax-Free Savings Account (TFSA) is a registered account offered by Canadian banks, credit unions, and investment firms. Money you put in grows tax-free, and you pay no tax when you withdraw it. The account is yours alone — the government does not manage it or decide how you use the funds.

You must be a Canadian resident, at least 18 years old, and have a valid Social Insurance Number (SIN) to open one. The financial institution you choose handles the registration with the Canada Revenue Agency (CRA) as part of the opening process. You do not contact the CRA directly.

The annual contribution limit changes each year based on inflation. For 2024, you can deposit up to $7,000 per year. If you have not used your full limit in previous years, that unused room carries forward — the CRA tracks your cumulative limit and tells you what you can deposit when you file your tax return.

Key Takeaways

  • You open a TFSA at a bank, credit union, or investment firm, not through the government, and the institution handles CRA registration for you.
  • You must be 18 or older, a Canadian resident, and have a valid SIN to open an account.
  • The annual contribution limit is $7,000 for 2024, and unused room from previous years carries forward to future years.
  • You can withdraw money at any time without penalty, and the amount you withdraw becomes available to deposit again the following year.
  • The account earns no tax on interest, dividends, or capital gains, and you report no TFSA income on your tax return.

What you need before you walk in or go online

Bring or have ready your Social Insurance Number, a piece of government-issued photo ID (driver's license or passport), and proof of your current address. Most institutions accept a recent utility bill, lease, or mortgage statement as proof of address. If you are opening the account in person, bring the originals. If you are opening online, you will upload images or answer security questions instead.

You will also choose what type of account you want within the TFSA structure. Most people start with a savings account (your money sits in the account and earns interest) or a TFSA investment account (you buy stocks, bonds, or mutual funds). If you are unsure which one fits your situation, ask the institution — they can explain the difference and what interest or returns each option currently offers.

Have the name and contact details of your employer or a recent employer ready if this is your first time opening a registered account. Some institutions use employment history to verify your identity, though this step is becoming less common as online verification improves.

The steps to open an account in person or online

If you are opening in person at a branch, you will fill out a TFSA process form on paper or on a tablet in the branch. The form asks for your name, address, SIN, date of birth, and citizenship status. You will confirm the type of account you want (savings or investment), and the institution will explain the fees, interest rates, or investment options available. The whole process usually takes 15 to 30 minutes.

If you are opening online, you will create a login, enter the same information, and upload or photograph your ID and proof of address. The institution will verify your identity — some use automated checks against government databases, others send a verification code to your phone or email. Once verified, your account opens when ready or within one business day, and you can start depositing money right away.

Either way, the institution files the CRA registration form on your behalf. You do not need to contact the CRA or file anything separately. The account number and registration confirmation arrive by mail or email within a few days.

How much you can deposit and when

Your contribution room is the total amount you are allowed to deposit in a calendar year. For 2024, the annual limit is $7,000. If you did not use your full limit in 2023, 2022, or earlier years, that unused room rolls forward. The CRA calculates your total available room and shows it on your Notice of Assessment (the document you receive after filing your tax return) or in your CRA My Account online portal.

You can deposit money into your TFSA at any time during the year — there is no important date like there is for RRSPs. You can deposit in one lump sum or spread deposits across the year. If you deposit more than your available room, you will owe a penalty tax of 1 percent per month on the excess amount, so it is worth checking your room before you deposit a large amount.

If you withdraw money from your TFSA, that amount becomes available to deposit again — but not until January 1 of the following year. For example, if you withdraw $3,000 in June, you cannot re-deposit that $3,000 until January 1 of the next year. Your annual limit and your withdrawal room are separate.

What happens to your money once it is in the account

If you opened a TFSA savings account, your money sits in the account and earns interest at the rate the institution offers. That interest is not taxed — you keep all of it. The interest rate varies by institution and changes over time, so it is worth comparing rates before you open if you plan to keep a large balance.

If you opened a TFSA investment account, you use the money to buy stocks, bonds, mutual funds, or exchange-traded funds (ETFs). Any gains you make — dividends, interest from bonds, or profit when you sell an investment at a higher price — are not taxed inside the TFSA. You keep 100 percent of the growth. This makes TFSAs popular for people who trade frequently or hold growth stocks, because the tax savings add up over time.

You can move money between your TFSA savings account and a TFSA investment account at the same institution without penalty. You can also transfer your entire TFSA to a different bank or investment firm — this is called a direct transfer and does not count against your contribution room.

Reporting your TFSA on your tax return

You do not report TFSA income, withdrawals, or account activity on your tax return. The CRA does not ask about it. Your TFSA is completely separate from your taxable income.

The only time the CRA cares about your TFSA is if you exceed your contribution room. If you deposit more than you are allowed, you will receive a letter from the CRA explaining the excess and the penalty. You can withdraw the excess amount to avoid further penalties, and the CRA will calculate the tax owed based on how long the excess sat in the account.

You can check your contribution room anytime by logging into CRA My Account online or by calling the CRA at 1-800-959-5525. Your most recent Notice of Assessment also shows your room as of the date you filed your return.

Moving or closing your TFSA

If you want to move your TFSA to a different bank or investment firm, contact the new institution and ask them to initiate a direct transfer. Provide them with your account number and the name of your current institution. The new institution will request your account from the old one, and the transfer happens without you withdrawing and re-depositing the money. This keeps your contribution room intact and avoids any tax complications.

If you want to close your TFSA, contact your institution and ask them to close the account. Any money in the account will be transferred to a chequing or savings account you specify, or sent to you by cheque. Closing the account does not affect your contribution room — you can open a new TFSA at any time and your unused room is still there.

If you move out of Canada or lose your Canadian residency status, you should close your TFSA or contact the CRA to discuss what happens to it. Non-residents cannot contribute to a TFSA, and there are tax rules about what happens to money already in the account.

Frequently Asked Questions

Can I have more than one TFSA?

Yes, you can open multiple TFSAs at different institutions. However, your contribution room is shared across all your accounts combined. If you have $7,000 of room and open two TFSAs, you can deposit a total of $7,000 across both accounts, not $7,000 in each one. The CRA tracks your total contributions across all your TFSAs.

What happens to my TFSA if I die?

Your TFSA becomes part of your estate and passes to your beneficiaries according to your will or the account's beneficiary designation. The money in the account is not taxed when it transfers. Your executor or beneficiary should contact the institution to transfer or close the account.

Can I use my TFSA to buy a house?

Yes. A TFSA has no restrictions on how you use the money — you can withdraw it at any time for any reason without penalty. Many people use TFSAs to save for a down payment because the growth is tax-free. Unlike an RRSP, there is no special first-time homebuyer program that lets you withdraw early.

What is the difference between a TFSA and an RRSP?

A TFSA grows tax-free and you pay no tax on withdrawals. An RRSP gives you a tax deduction when you contribute, but you pay tax on withdrawals. TFSAs have a lower annual limit ($7,000 for 2024) but no age limit. RRSPs have a higher limit but you must stop contributing at age 71. Choose based on whether you need the tax deduction now or tax-free growth later.

Do I need a TFSA if I already have an RRSP?

They serve different purposes. An RRSP is best if you want to reduce your taxable income this year. A TFSA is best if you want tax-free growth and flexibility to withdraw without penalty. Many people use both — contribute to an RRSP for the deduction, then use the refund to fund a TFSA.