The TFSA, explained
The Tax-Free Savings Account is the most flexible registered account in Canada: everything inside grows tax-free, withdrawals are tax-free, and whatever you take out is added back to your room the following year.
Your contribution room
The annual TFSA limit is $7,000 for 2025 (it was also $7,000 in 2024). Room accumulates every year you're 18 or older and a Canadian resident, starting from 2009 — so a long-eligible saver has well over $100,000 of room today.
Your exact room is personal and depends on prior contributions and withdrawals. Always confirm the current figure in your CRA My Account before maxing out — over-contributing triggers a 1%-per-month penalty.
Keep reading: TFSA growth calculator · TFSA vs RRSP. For the official rules, see CRA — Tax-Free Savings Account.
Why tax-free matters
Because gains are never taxed, the TFSA is ideal for investments you expect to grow. Withdrawals don't count as income, so they don't affect income-tested benefits like OAS or the GIS — a meaningful edge in retirement.
The re-contribution trap
If you withdraw, you get that room back — but not until January 1 of the next year. Re-contributing in the same calendar year can accidentally put you over your limit and trigger penalties.
Frequently asked
TFSA or RRSP first?
It depends on your income now versus in retirement. Higher earners often favour the RRSP deduction; lower/variable earners often favour the TFSA's flexibility. See our TFSA vs RRSP guide.
Sources
General information for Canadian readers, not individualized financial, tax or investment advice. Figures reflect the date reviewed; confirm current limits and rules with the CRA or a qualified professional before acting.