A Tax-Free Savings account is a type of account available to Canadians to help them save for retirement, a major purchase, or any other goal. Each Canadian resident age 18 or over receives contribution room annually that can be used at any time; it does not disappear if unused. If you turned 18 in 2009 or earlier and were a resident of Canada since that time, you have $69,500 of total TFSA contribution room as of 2020; in 2020, the annual contribution room was $6,000 and a list of contribution amounts by year is available in the table below or at Canada Revenue Agency. The benefit of investing inside a TFSA is that there are no taxes due on investment income of any kind, nor are there taxes on withdrawal. Once the money has been deposited in the TFSA, it is truly tax-free.
TFSAs are very efficient savings vehicles given their complete tax-sheltering status, and since there are no penalties for withdrawals, they are quite versatile and can be used for short- or long-term saving. If you withdraw funds from your TFSA, you regain the withdrawn contribution room up to your lifetime maximum, but only on January 1st of the following year.
The main limitations for TFSAs are smaller contribution room relative to RRSPs and the contributions are not tax deductible.
TFSA Annual Contribution Amounts