TFSA Contribution Rules




According to the Government of Canada, the Tax-Free Savings Account (TFSA) program began in 2009. It is a way for individuals who are 18 and older to set money aside tax-free throughout their lifetime.

Contributions to a TFSA are not deductible for income tax purposes. Any amount contributed as well as any income earned in the account (for example, investment income and capital gains) is generally tax-free, even when it is withdrawn. Administrative or other fees in relation to TFSA and any interest or money borrowed to contribute to a TFSA are not deductible.


TFSA Limits for 2018

If you have been eligible to contribute to the TFSA since its inception in 2009, it means that in 2018, you will have a total contribution room of $57,500. You can invest up to $57,500 and not pay any taxes on the income earned on your investment.

You will accumulate TFSA contribution room for each year even if you do not file an income tax and benefit return or open a TFSA. Government of Canada

The annual TFSA dollar limit for the years 2009, 2010, 2011 and 2012 was $5,000.
The annual TFSA dollar limit for the years 2013 and 2014 was $5,500.
The annual TFSA dollar limit for the year 2015 was $10,000.
The annual TFSA dollar limit for the year 2016 was $5,500.
The annual TFSA dollar limit for the year 2017 is $5,500.

Your annual TFSA contribution limit is $5,500 per year. The TFSA annual room limit will be indexed to inflation and rounded to the nearest $500. (Hence $57,500 since inception)

Unused contribution room can be carried forward indefinitely and if you choose to withdraw funds from your TFSA in any particular year, the amount withdrawn can be re-contributed in the following year.
If you over-contribute into your TFSA your extra contribution will be charged a 1% penalty tax per month, until it’s removed.



TFSAs are excellent for younger savers or those just entering the workforce and starting with a lower salary, also for retirees in a high tax bracket in retirement or those over the age of 71 wanting to invest. For some, it may make more sense for them to invest their savings in a TFSA rather than an RRSP.

Don’t wait for retirement to enjoy life !!



  1. Great summary Steve.
    One more thing, keep US dividend stock in your RRSP rather than TFSA for tax purposes. You will get taxed on it in the TFSA otherwise, it’s not exempt!

    • Hey Tom, I am not as familiar with US retirements accounts, but what I understand a TFSA is similar to a Roth IRA. Contributions to a TFSA are not deductible for income tax purposes, income and capital gains is tax-free. RRSP are similar to the traditional IRA. Contributions are tax deductible and income and capital gains is tax free.

  2. TFSA sounds a good saving tool. It looks a little bit similar to the Roth IRA in US. With the growth portion tax free, it gives investors advantage over the long term. The withdrawal rules provide the flexibility just in case the money is needed.

    • Hi Helen, TFSA are excellent savings tool with lots of flexibility. They are very similar to the Roth IRA in the US. Next week I am writing a post on RRSP which is very similar to the US traditional IRA.

  3. TFSA is the greatest tool ever! I love it sooo much!

    The great thing about it is that it’s flexible. You can take it out and recontribue back that same amount in the next Jan. (Assuming that initially you had it everything maxed).

    Flexibility is good, but I find that letting it become too flexible, ppl will have the itch to take it out to spend. My friends did that (for clothes shopping) and they never recontribute back lol. They only pulled it out because they knew they wouldn’t be penalized haha.

    • TFSA are great ! I hope people are using them wisely and not withdrawing for shopping but I am sure a lot do. I had a friend that did similar for a down payment on a new car and never re-contributed it back. Now the car is worth a lot less and he doesn’t have any savings.

      • Haha yeah a lot of ppl use it to buy houses and cars. My fiancé and I had to drain all of our TFSA plus the $25k from RRSP (HBP) to pay for our down payment on the house.

        initially, it was a bit heart breaking but we were eager to refill the accounts back up, so we made it a priority within a few years.

        We don’t really wanna go through that again… it’s painful feeling buying a house…

  4. Great summary!

    I love the TFSA. It’s too bad the Canadian government named this tool so poorly so that people are not maximizing it.

    Also too bad that they made it so confusing, changing the contribution room from $5000 to $10,000 then $5500 or whatnot!

    • Hi GYM, yes it is confusing for contributing and if you withdraw funds and re-contributing the following year. But as long as you know the rules TFSA are great with lots of flexibility.

    • 100% agree Enoch, They are extremely flexible. I like how all dividend income is tax free and doesn’t effect my taxable income.(Great for tax planning)

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