TFSA Contribution Limit And Overview

TFSA Contribution Limit And Overview

The federal government increased the annual TFSA contribution limit to $7,000 for 2024 – an increase of $500 over the annual TFSA limit that we had in 2023. It’s good news for Canadian savers and investors, who as of January 1, 2024, will have a cumulative lifetime TFSA contribution limit of $95,000.

The Tax Free Savings Account (TFSA) was introduced in 2009 by the federal conservative government. The TFSA limit started at $5,000 that year – an amount that “will be indexed to inflation and rounded to the nearest $500.”

With inflation once again coming in hot at 4.8% in 2023 (versus 6.3% in 2022) the TFSA limit was widely expected to increase again next year.

TFSA Contribution Limit Since 2009

The table below shows the year-by-year historical TFSA contribution limits since 2009.

YearTFSA Contribution Limit

Note that the maximum lifetime TFSA limit of $95,000 applies only to those who were 18 or older as of December 31, 2009. If you were born after 1991 then your lifetime TFSA contribution limit begins the year you turned 18.

You can find your TFSA contribution room information online at CRA My Account, or by calling Tax Information Phone Service (TIPS) at 1-800-267-6999.

TFSA Overview

The Tax Free Savings Account is a flexible vehicle for Canadians to save for a variety of goals. You can contribute every year as long as you’re 18 or older and have a valid social insurance number.

That means young savers can use their TFSA contribution room to establish an emergency fund or save for a down payment on a home. Long-term investors can use their TFSA to invest in ETFs, stocks, or mutual funds and save for the future. Retirees can continue to save inside their TFSA for future consumption or withdraw from their TFSA tax-free without impacting their Old Age Security or GIS.

Unlike an RRSP, any amount contributed to your TFSA is not tax deductible and so it does not reduce your net income for tax purposes.

  • Your contribution room is capped at your TFSA limit. Excess contributions will be taxed at 1 percent per month
  • Any withdrawals will be added back to your TFSA contribution room at the start of the next calendar year
  • You can replace the amount of your withdrawal in the same year only if you have available TFSA contribution room
  • Any income earned in the account, such as interest, dividends, or capital gains is tax-free upon withdrawal

How to Open a TFSA

Any Canadian 18 or older can open a TFSA. You are allowed to have more than one TFSA account open at any given time, but the total amount you contribute to all of your TFSA accounts cannot exceed your available TFSA contribution room.

To open a TFSA you can contact any bank, credit union, insurance company, trust company or robo-advisor and provide that issuer with your social insurance number and date of birth.

The most common type of TFSA offered is a deposit account such as a high interest savings account or a GIC.

You can also open a self-directed TFSA account where you can build and manage your own savings and investments.

Qualified TFSA Investments

That’s right – you’re not just limited to savings accounts and GICs. Generally, you can put the same investments in your TFSA as you can inside your RRSP. These types of allowable investments include:

  • Cash
  • GICs
  • Mutual funds
  • Stocks
  • Exchange-Traded Funds (ETFs)
  • Bonds

You can contribute foreign currency such as USD to your TFSA. Note that your issuer will convert the funds to Canadian dollars. The total amount of your contribution, in Canadian dollars, cannot exceed your TFSA contribution room.

If you receive dividend income from a foreign country inside your TFSA, the dividend income could be subject to foreign withholding tax.

Gains Inside Your TFSA

Some investors may be tempted to put risky assets inside their TFSA account to try and earn tax-free capital gains. There are two advantages to this strategy:

  1. Earn tax-free capital gains
  2. Potentially increase your available TFSA contribution room

For example, I maxed out my annual TFSA contributions in 2009, 2010, and 2011. That meant contributions of $15,000. I invested these funds in dividend paying stocks, which, over time, increased the total portfolio value to $19,500.

I withdrew the entire amount in mid-2011 to top-up the down payment on our new house. When the calendar turned to 2012, I had a new lifetime TFSA contribution limit of $24,500.

How did I have $24,500 in unused TFSA contribution room available even though most other Canadians had $20,000?

Any TFSA withdrawals are added back to your available TFSA contribution room at the beginning of the next calendar year. That amount was $19,500. In addition, the 2012 TFSA limit of $5,000 was added to my overall TFSA contribution room for a total of $24,500.

Losses Inside Your TFSA

The risk cuts both ways, though.

Let’s say the dividend stock picks inside my TFSA incurred a loss of $4,500. I contributed $15,000 but they’re only worth $10,500 when I need to withdraw the money for my house down payment.

The next calendar year, after I withdrew the funds, I would have only saw $10,500 added back to my TFSA contribution limit, plus the new 2012-dollar limit of $5,000 – for a total TFSA limit of $15,500.

The other downside to an investment losing money inside your TFSA is that you cannot claim a capital loss.

“In kind” TFSA Contributions

You can make “in kind” contributions to your TFSA – for example transferring stocks or funds held in your non-registered account to your TFSA.

According to the CRA, you will be considered to have disposed of the security at its fair market value at the time of the contribution. If that value is more than the original cost of the security, you will have to report the capital gain on your income tax return. However, if the value is less than the original cost, you cannot claim the resulting capital loss.

The amount of the contribution to your TFSA will be equal to the fair market value of the property.

This can be an excellent strategy for seniors and retirees to transfer securities from their taxable investment account and into their sheltered “tax-free” TFSA.

Transfer from your RRSP

You can also transfer an investment from your RRSP to your TFSA. Again, according to the CRA, you will be considered to have withdrawn the investment from the RRSP at its fair market value.

This amount is reported as an RRSP withdrawal and must be included in your income for that tax year.

“The tax withheld on the withdrawal can be claimed at line 437 of your income tax and benefit return.”

If the transfer from your RRSP to TFSA takes place immediately, the same value will be used as the amount of the contribution to the TFSA. If the contribution is delayed or deferred, the amount of the contribution will be the fair market value of the investment at the time of that contribution.

TFSA Over-Contribution Penalty

Unlike the RRSP Over-Contribution limit of $2,000, TFSAs have no such room for error.

Some Canadians have run afoul of the CRA for over-contributing to their TFSA. The excess contributions are subject to a 1 percent penalty tax per month. For example, if you’ve over-contributed $1,000 you would have to pay $10 per month.

If you receive a TFSA excess amount letter from the CRA you should remove the excess amount immediately. Go to CRA My Account for your room limit as of January 1, or complete Form RC343, Worksheet – TFSA contribution room if you have contributed to your TFSA in the current year.

TFSA Impact on Government Benefits

The TFSA has been a tremendous boon for seniors and retirees. The main advantage is that any income earned inside your TFSA, or amounts you withdraw from your TFSA, won’t impact means-tested government benefits such as Old Age Security (OAS) and the Guaranteed Income Supplement (GIS).

That means retirees could get a portion of their retirement income from their TFSA and not have that amount increase their total net income. This is beneficial to either preserve GIS benefits or to avoid the dreaded OAS clawback.

TFSA income or withdrawals will also not affect employment insurance benefits, or your eligibility for other credits such as the Canada child benefit (CCB), the working income tax benefit (WITB), the GST credit, or the age amount.

TFSA Beneficiaries and Death of TFSA Holder

There are two types of TFSA beneficiaries:

  1. A survivor who has been designated as a successor holder
  2. Designated beneficiaries, such as a survivor who has not been named successor holder, a former spouse or common-law partner, children, and qualified donees

A successor holder is a spouse or common-law partner of the holder at the time of death and is named by the deceased as the successor holder of the TFSA.

The successor holder acquires all of the rights of the holder, including the right to revoke any beneficiary designation. This spouse or common-law partner becomes the new TFSA account holder.

The TFSA continues to exist and both its value at the date of the original holder’s death and any income earned after that date continue to be sheltered from tax under the new successor holder.

The successor holder can make tax-free withdrawals from the deceased holder’s TFSA account. He or she can also make new contributions to that account, subject to their own unused TFSA contribution room.

Investing Ideas for your TFSA

The TFSA is an incredible savings tool. Low income earners should primarily use their TFSA to save for retirement, while higher income earners should maximize their RRSP contributions first, but ideally contribute to both their RRSP and TFSA.

Related: A Sensible RRSP vs. TFSA Comparison

Here are my recommendations for the best TFSA investments for long term savers:

Invest with a Robo Advisor: Robo-advisors offer Canadians an easy and hands-off way to automatically invest for the future. Open a TFSA at a robo-advisor like Wealthsimple and you can invest in a diversified portfolio of index ETFs for a management fee of 0.50 percent, plus the MER of the ETFs, for a total cost of about 0.65 percent.

DIY Invest with ETFs: Investors who are more inclined to take the wheel themselves can open a self-directed TFSA account at a discount broker like Questrade and build their own investment portfolio. With the introduction of one-ticket asset allocation ETFs from the likes of Vanguard, iShares, and BMO, it’s never been easier to build a globally diversified portfolio on the cheap. Vanguard’s VBAL, for example, represents the classic 60/40 balanced portfolio and comes with a MER of just 0.24 percent.

Invest in bank index funds: Maybe you’re more comfortable staying at your home bank and investing through an advisor. Know that every bank offers its own suite of index funds, which are considerably cheaper than their actively managed cousins and tend to outperform. Open a TFSA account at your bank and insist on getting a portfolio of index funds. TD’s popular e-Series funds are the most highly rated and lowest cost of the bunch and will cost around 0.45 percent. Expect the other banks’ index funds to cost closer to 1 percent.

As for me, I’ve explained before exactly how I invest my own money, holding Vanguard’s All Equity ETF (VEQT) across all accounts – including inside my TFSA at Wealthsimple Trade. I prefer to use my TFSA for long-term investing rather than as a place to stash cash in a high interest savings account. Tax free growth for the win!

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  1. MojaZosia on December 17, 2019 at 7:32 pm

    Robb — consider updating your TFSA upon death of a spouse or common-law-partner to include Form RC240 Designation of an Exempt Contribution Tax-Free Savings Account (TFSA) a long as it a surviving spouse partner or spouse. There are a time periods to file and subsequently claim. Until the latter happens, the tax clock on income continue to run. To quote Yogi Berra “Its not over ’til its Over”


    PS: The foreign withholding if exits is not recoverable.

  2. Frito on December 17, 2019 at 9:49 pm

    Good information. More people need to take advantage of this great savings vehicle!

    I’m going to disagree with your statement

    “while higher income earners should maximize their RRSP contributions first”

    All should invest in TFSAs first in my opinion. High earners will have more than enough in RRSPs – all taxable – if they are inclined to save for retirement. As you point out, investment opportunities are the same for each account but the TFSA is effectively invisible to the tax man, particularly after it has increased in value over a few decades. You may save some dollars today but they will turn into a high income withdrawal obligation years later. I’ve seen so many friends’ focus on today’s tax savings turn into rear view regret as to resulting retirement finances – some too much $ (high earners saving to RRSP only, continuing to work later, too much taxable income), some too little $ (self employed trying to keep taxes and CPP premium obligations down find out actual CPP payout is not liveable).

    Something to think about, anyway. As you may notice, I’m a hard core fan of the TFSA!

    • Matthew on December 17, 2019 at 10:00 pm

      Agreed. My wealth advisor says TFSA first, RRSP next, non-reg next. It’s a no brainer for high income earners.

  3. John from Edmonton on December 17, 2019 at 9:50 pm

    Thanks for that comprehensive post on TFSAs. I have one addition. Unless the rule has changed recently, Canadian citizens who are non-residents of Canada are forbidden to contribute to TFSAs.

    • Catharine Ho on November 12, 2020 at 6:24 pm

      Hello, I understand non-residents are not allowed to invest in TFSA however if one returns to Canada half way through the year can we contribute half? My bank told me to ask my accountant and my accountant told me to ask the bank. Anyone know where I can get a straight answer?
      Thank you

  4. Glenn on December 18, 2019 at 6:34 am

    Also, be careful if you are a US citizen resident of Canada. There are onerous tax reporting requirements required to the IRS as they consider Canadian TFSA’s to be “foreign trusts” and they also do not recognize them as being “retirement accounts” as they do RRSP’s. That will result in reporting all of your gains made inside the TFSA to the IRS as taxable income.

    • Deborah S on January 10, 2021 at 6:03 am

      For this reason, a Canadian TFSA holder with a US person spouse should name the spouse as a beneficiary, not a successor holder.

    • Harold on December 21, 2021 at 5:00 pm

      My TFSAs resulting in my paying big dollars to an accounting firm when I renounced my US citizenship.

  5. Mario on December 18, 2019 at 11:29 am

    The TFSA is visible to the tax man as financial institutions report it to CRA . CRA is hitting investors with audits if they trade too frequently for the agency’s comfort. The CRA has argued that investors who use their TFSAs for frequent trading and earn large gains are effectively running a trading business, and should be taxed on income. See this article:

  6. Frito on December 19, 2019 at 10:48 pm

    The invisibility I was referring to is that TFSA withdrawals under “normal” circumstances are not taxable and not included in means tests for govt benefits. Of course there’s always the players that take advantage and wreck things for regular people trying to optimize the opportunity presented in good faith.

  7. Bryan on January 12, 2020 at 9:25 pm

    Very comprehensive! I think this point needs to be adjusted though: “Note that the maximum lifetime TFSA limit of $69,500 applies only to those who were 18 or older on January 1, 2009.” It should be anyone who was 18 or older as of December 31, 2009; born in 1991 or earlier. As soon as one turned 18, they were entitled to that initial $5,000 of room in 2009.

    • Robb Engen on January 13, 2020 at 9:01 am

      Thanks Bryan, yes that makes sense and I’ve made that correction in the article.

  8. RJ on October 21, 2020 at 12:24 pm

    So in the article you say the following: “I invested these funds in dividend paying stocks, which, over time, increased the total portfolio value…”, but when you provide the investing ideas for your TFSA you recommend three different approaches all of which involve ongoing fees that will erode a portion of the investment even if it is a small portion.
    So why wouldn’t you recommend investing in dividend paying stocks since it is the strategy you took and it worked well for you? If you use a low cost broker you will pay a one time fee for the purchase and avoid the ongoing fees. Seems strange to me that you do one approach (that makes sense to me) but recommend other ongoing fee based approaches.

    • Robb Engen on October 21, 2020 at 5:35 pm

      Hi RJ, there was nothing special about my dividend stocks – the entire market was rising after the financial crisis in 2009. Index funds would have also performed equally well over that time.

      I saw the light back in 2015 and switched my portfolio from a risky basket of Canadian dividend stocks to a more globally diverse portfolio of index ETFs. Yes, there are ongoing costs involved – my portfolio comes with a MER of 0.25% – but that’s the price of an insane amount of diversification and automatic rebalancing.

      Again, there’s nothing special about dividends and I don’t recommend for anyone to pick individual stocks. Indexing has proven (both academically and empirically) to outperform active investing strategies and will lead to the best long-term outcomes for investors.

      Dividend investing has been romanticized as a way to invest and outperform the index, but there’s no evidence showing that to be true.

  9. Catharine Ho on November 12, 2020 at 6:07 pm

    Hello, I understand non-residents are not allowed to invest in TFSA however if one returns to Canada half way through the year can we contribute half? My bank told me to ask my accountant and my accountant told me to ask the bank. Anyone know where I can get a straight answer?
    Thank you

    • Deborah S on January 10, 2021 at 5:53 am

      Catherine, you should check with CRA. Our accountant told us (we were non-residents for two half-years) that we should be able to make an entire year’s contribution, even for the years we were in Canada for only six months. I need to phone CRA (sigh) to confirm, because the My CRA account still shows us as non-residents, even though we’ve updated our address with them.

      • Catharine Ho on January 23, 2021 at 7:29 pm

        Thank you for your reply Deborah. We were teaching oversees for many years and now upon return we have found all of this very confusing. I will contact CRA to confirm. We paid taxes last year so I think we are in the system now.
        Thanks again for taking the time to reply , much appreciated !

  10. Gary on January 4, 2021 at 10:07 am

    For TFSAs, the successor can consolidate the deceased spouse or common-law partner’s TFSA with their own. For estate planning, this TFSA may have a designated beneficiary. This 1) saves managing two TFSA accounts and 2) leaves one account with the designated beneficiary(ies).

  11. Ian on January 8, 2021 at 3:34 pm

    I have a TFSA with RBC which is held in a mutual fund. I would like to move it to an ETF in Wealthsimple Trade. How do I know what the equivalent ETF is? The fund is ‘RBF658 – RBC SELECT BALANCED PORTFOLIO F’

    • Robb Engen on January 9, 2021 at 2:01 pm

      Hi Ian, the best equivalent ETF would be a balanced asset allocation ETF (60/40 portfolio). Vanguard’s VBAL or iShares’ XBAL would fit the bill.

  12. Rob Lavery on January 14, 2021 at 9:44 am

    Thanks for the comprehensive article on TFSA’s. I seem to be slow on this, still confused about adding investments to my ‘TFSA’ which currently is just a savings account with tangerine. From your article, all I need do is designate my tangerine ETF account as part of my TFSA and it’s done?
    thanks Rob

    • Robb Engen on January 14, 2021 at 4:57 pm

      Hi Rob, the banks have done a poor job in educating Canadians about TFSAs. They’ve largely been promoted as high interest savings accounts, but the truth is you can invest in just about anything (stocks, bonds, mutual funds, ETFs), just like with your RRSP.

      Rob, if you already have a TFSA and the funds are just sitting in cash, you can ‘invest’ that money. Now let’s say your TFSA savings account is at Tangerine. The steps to take to invest that money would be to open a TFSA Investing Account ( and then transfer your TFSA savings account into that TFSA Investing Account so you can invest in the Tangerine ETFs.

      It’s important that the money in your TFSA savings account stays inside its “TFSA container”, meaning you’re not withdrawing this money into your personal chequing or savings account and then depositing it somewhere else. Transfer TFSA to TFSA, if that makes sense.

      • Rob Lavery on January 15, 2021 at 2:45 pm

        OK – had to read it a few times to get my head around it – and you’re right, the banks don’t really make it easy. I’ve opened (another) account for TFSA ETF – just in wait of confirmation. But I feel like I’ve entered a whole new league of investing – wish I was 20 years younger 😉
        Thanks for your help

  13. Sara on December 8, 2021 at 3:46 pm

    TFSA can also be invested in self directed Mortgages. For me RRSP has not worked like it is supposed to be. My Retirement income (supposed to be lower) is more than my working years (supposed to be higher).

  14. Gert on December 11, 2021 at 7:57 am

    If someone has contributed the full allowable amounts since 2009, as you say the total would be $81,500.
    Now I’m not sure on how to phrase my question but what would this have been expected to grow to, given market corrections over the years, using your investment strategy? I hope I’m asking this correctly.

  15. Teresa on September 23, 2022 at 9:40 am

    I over-conributed to my TFSA by mistake when I closed one bank account and transferred he money to a new bank. CRA says I now owe them $3000.00 and it was not invested in anything. Thanks for helping a low income senior.

  16. Wally on November 15, 2022 at 5:21 pm

    Hi Robb.
    I do not see how an “In Kind” transfer would be a benefit from a non-registered account if there is a capital loss, since you could have the ability to claim the loss converting it to cash first. Please expand on how this would be beneficial for “draw down” (retired) individuals.

    • Robb Engen on November 15, 2022 at 9:21 pm

      Hi Wally, beneficial in “normal” years when you have a stock or ETF you like in your non-registered account (in a gain position) and you want to move $6,500 worth of it into your TFSA without selling it.

      Not beneficial if you’re in a loss position and wanting to make the same transfer.

      Sorry if that wasn’t clear.

  17. Larry/Lenny Everson on May 17, 2024 at 7:34 am

    I discovered that I’d exceeded my lifetime maximum TFSA allowance this year. What should I do? I’ve received no notice from the CRA.

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