TFSA basics

The Tax-Free Savings Account (TFSA) is a versatile general-purpose investing account. Like RRSPs and RESPs, the TFSA is a registered account that provides tax-sheltered earnings within the account. An added benefit is that withdrawals from a TFSA are not subject to tax.

This article summarizes the key features, rules and advantages to be aware of.

TFSA key features and rules


Individuals with a valid Canadian Social Insurance Number who are 18 years of age or older and who live in Canada.

Note: A person with a valid SIN who is a non-resident of Canada for income tax purposes can open a TFSA, but contributions made while the person is a non-resident are subject to a 1% tax for each month that the contribution remains in the account.*

Tax treatment

Contributions must be made from after-tax income. However, earnings within the account are not taxable. And you don't pay tax when you withdraw your money either.

Annual contribution limit

$6,000 per year for 2022.

The TFSA annual contribution limit has been kept at $6,000 for 2022, similar to the last three years.

Contribution room carry-forward

Unused contribution amounts can be carried forward and used in subsequent years.

If you have never contributed to a TFSA, and you were at least 18 years old in 2009, then as of 2022 you will have accumulated $81,500 of contribution room.


Withdraw funds from your TFSA any time. Amounts withdrawn in a given year are added back to your contribution room for the next year — regardless of whether the amounts withdrawn are your original contribution or the earnings from your investments.

Over-contribution penalty

There is a penalty if you accidentally contribute more than your allowable limit. In that case, a tax equal to 1% of the highest excess TFSA amount in the month will be applied for each month that you are in an excess contribution position.

TFSA advantages

The TFSA is attractive to a wide range of Canadian investors in different circumstances because of these key advantages:

Tax-free earnings and withdrawals

Contributions must be made-from after-tax dollars. But once contributed, your money is completely sheltered from Canadian tax. Income, dividends and capital gains accrue in the account tax free. And your withdrawals are not treated as taxable income. No other registered plan offers equivalent tax advantages.

Since earnings and withdrawals are not included as income for tax purposes, they don't impact your eligibility for Old Age Security, or for any other income-tested federal benefits.

Equal eligibility

Everyone has the same contribution room. You don't need to have earned income in order to accumulate contribution room. So if you are retired or not currently working, you can still contribute to a TFSA.


TFSA rules allow you to withdraw funds whenever you want, for any purpose. This liquidity makes the TFSA an extremely useful general-purpose account for a wide range of long- and short-term saving and investing goals. You can use a TFSA to grow your retirement nest egg or to save in order to start a business. You can also use a TFSA to build an emergency fund, or save for a major purchase such as a home, new car, or vacation.

No age limit on contributions

As long as you are eligible, you can contribute every year to your TFSA for as long as you like. And you can maintain your TFSA for as long as you like — there is no requirement to withdraw assets or collapse your account by a certain age. This makes the TFSA a valuable complement to your RRSP or RRIF.

Investment choice

Investment choice is another key benefit of the TFSA. With a self-directed TFSA, you are in full control. You can hold a wide range of eligible investments in your TFSA, and create an asset mix that is appropriate for your objectives, timeline and tolerance for risk.

Generally, the types of investments permitted in a TFSA are the same as those permitted in a registered retirement savings plan (RRSP). These include:

  • Securities such as stocks and exchange-traded funds (ETFs) listed on a designated stock exchange
  •  Bonds
  • Mutual funds
  • Guaranteed Investment Certificates (GICs)
  • Cash

For more information about qualified investments, visit the TFSA section of the Canada Revenue Agency website.

Open an account


If you transfer TFSA assets from another institution to your Qtrade Direct Investing, we will cover your transfer-out fees up to $150. For terms and conditions of that offer, and for help with your transfer, visit our Account Transfer page.

For help with TFSA accounts with Qtrade Direct Investing, please speak to one of our investment representatives.