Plain meaning
A registered account where eligible investment income and withdrawals are generally tax-free.
Also called
Tax Free Savings Account
Background
The TFSA was introduced by the federal government in 2009.
Key points
- Canadian residents who are at least 18 years old and have a valid social insurance number can generally open a TFSA.
- Contributions are not deductible for income tax purposes.
- Interest, dividends, and capital gains earned in the account are generally not taxed while they remain in the TFSA or when they are withdrawn.
- Withdrawals generally create new contribution room in the following calendar year.
- Contributing more than the available TFSA room can trigger a penalty tax.
Why it comes up
TFSA contribution room, withdrawals, recontributions, and overcontributions often appear in CRA reminders and household savings news.