Tax-Free Savings Account (TFSA) FAQs

What is the maximum I can contribute to a TFSA?
You can contribute up to $5,000 each year.

Can I have more than one TFSA?
Yes.  Keep in mind, however, the total amount you can contribute to all your TFSAs cannot exceed your maximum contribution room, which is up to $5,000 each year.

Can I contribute to my spouse’s or common-law partner’s TFSA?
No. You can give your spouse or common-law partner the money to deposit, but only the account holder can contribute to the account. This is recorded as your spouse’s or common-law partner’s contribution and does not affect your contribution limit.

Can I start a TFSA for my child?
No. TFSAs are available only to individuals who are residents of Canada and are 18 years of age or older.

If I don’t make a deposit to my TFSA, do I lose my $5,000 contribution room?
No. The unused contribution room will carry forward to the following years.

What happens if I contribute more than $5,000 to a TFSA?
A penalty of 1% per month on the amount in excess of your contribution limit will be assessed by the Canada Revenue Agency (CRA).

Who keeps track of my contributions to a TFSA?
CRA will determine your contribution room based on information regarding your deposits and withdrawals reported to them by the financial institution that holds your TFSA. It will be reported on the Notice of Assessment you receive after filing your personal income tax return.

Do I get a tax credit for my contribution to a TFSA?
No. Because the income earned is tax-sheltered, you cannot claim a tax credit for your contribution to a TFSA.

When I withdraw money from my TFSA, what happens?
TFSA withdrawals are different than RRSP withdrawals, tax is not withheld.

How many withdrawals can I make from a TFSA each year?
There is no limit.  You can withdraw money at any time for any reason.

Does a withdrawal impact the amount I can contribute later?
The amount you withdraw cannot be re-deposited until the following year.  In the next year, your contribution limit will increase by the withdrawn amount.  For instance, if you contributed $5,000 to a TFSA and subsequently withdrew $1,000 that year, the amount you could contribute to the TFSA starting the next year would be $6,000 ($5,000 for that year plus the $1,000 that was withdrawn in the prior year).

How much do I have to earn to contribute to a TFSA?
There is no income requirement. All eligible Canadians receive the same amount of contribution room regardless of income levels. Unlike an RRSP, the TFSA does not have an “earned income” requirement.

How will the income I earn in my TFSA affect my eligibility for Old Age Security or any other benefit that are determined by my level of income?
There is no impact on program eligibility or on the age credit.

How does a TFSA differ from an RRSP?
Generally, an RRSP is thought of as a retirement planning vehicle. The TFSA is a savings product designed for short-term and long-term goals. Some of the differences are:

• Contributions to a TFSA do not generate a tax credit
• Tax is not withheld on withdrawals from a TFSA
• “Earned income” is not required in order to contribute to a TFSA
• A TFSA never has to be converted to a different product whereas an RRSP has to be converted to a RRIF by the end of the year in which you turn 71 years of age

Can I open a joint TFSA?
No. Like an RRSP, the TFSA can only be held by individual.

What happens to my TFSA when I die?
You can elect to transfer your TFSA to your spouse or common-law partner without any impact on his or her contribution room. You may also elect for the TFSA to transfer to other beneficiaries.

Your TFSA will not be subject to taxation until the end of the calendar year following your death. Tax will be payable on income earned after the date of death.

What happens to my TFSA if there is a breakdown in my marriage or common-law partnership?
The assets in a TFSA may be transferred between the individuals involved. The contribution room of the person transferring the assets is not increased by the amount of the transfer nor is the contribution room of the person receiving the assets reduced by the amount transferred.

What happens if I become non-resident?
The TFSA continues to exist and income earned remains tax-free. You are not permitted to contribute to the TFSA while you are non-resident.