Tax-Free Savings Account (TFSA)

Published December 30, 2022
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What is a TFSA?

Have you wondered what a TFSA is? A TFSA or Tax-Free Savings Account is a Canadian tax-advantaged savings and/or investment account designed to help you save money throughout your life, while enabling you to potentially grow your money faster as there is no tax assessed on earned interest, dividends or capital gains – not even when you withdraw funds, which you can do at any time for any purpose.

How does a TFSA work?


A TFSA can be opened by any Canadian resident with a valid Social Insurance Number (SIN) who is at least 18 years of age, which is when a Canadian resident’s contribution room starts accruing. You can begin contributing to a TFSA once contribution room is available. The Canadian Revenue Agency (CRA) calculates your contribution room annually and, you are not required to have employment income to open a TFSA.

Eligibility for non-residents of Canada

Those who are considered non-residents do not accrue contribution room for any year during which they are considered a non-resident. Additionally, non-residents will pay 1% tax per month for each month the contribution is in the account.  For additional details on the tax implications of non-residents, please speak with your tax professional.

What TFSA investment options are available?

Edward Jones offers several investment options you can choose from for your TFSA, including:

Contribution rules and limits

The Canadian government introduced TFSAs in 2009, along with contribution limits, which are tied to economic inflation and adjusted “to the nearest $500.”  For 2023, the maximum contribution increased to $6,500. Contribution room continues to grow each year you are over age 18. The CRA calculates and tracks your contribution room, which you can access online through the My Account function on the Canada Revenue Agency (CRA) website.

Although you are allowed to hold more than one TFSA, your total contribution for all TFSA accounts combined cannot exceed your maximum contribution limit as designated by the CRA.

“In-kind” contributions to your TFSA

In addition to a cash contribution, you can make an "in-kind' contribution to your TFSA.  In-kind contributions are when you transfer assets from one investment account to another, for example transferring a stock, bond or mutual fund from your non-registered account into your TFSA. It is important to note that in-kind transfers into a TFSA are considered to have been sold at fair market value (FMV). For example, if you transfer securities from your non-registered account to your TFSA, the Canada Revenue Agency deems that you have sold the assets at "the highest price, expressed in dollars, that property would bring in an open and unrestricted market" and you may have to pay taxes on any interest, dividends or capital gains.  For additional information on fair market value visit

Unused contribution room isn’t lost

For the years in which you accumulated contribution room in your TFSA but did not contribute to, or contributed less than the maximum contribution allowed, the unused portion automatically carries forward. In other words, if you didn’t contribute your full amount in previous years, you can add that amount of the contribution to your current year. In addition, withdrawals from TFSAs can be recontributed the following tax year. 

Since the inception of TFSAs in 2009, Canadian residents who were at least age 18 and had a valid SIN, automatically began accruing TFSA contribution room every year, regardless of whether you had established a TFSA. If you have not opened a TFSA but qualified to do so as of 2009, your unused contribution room up to and including 2023 would be $88,000. The good news is, that if you wished to do so, you could legally contribute that full amount in 2023.

Also, there is no limit on the number of years that an unused contribution room can be carried forward. The annual contribution limits since TFSAs began in 2009 were:

Current and Historical TFSA Annual Contribution Limits

Current and Historical TFSA Annual Contribution Limits
2009 – 2012*


2013 – 2014*$5,500
2016 – 2018*$5,500
2019 – 2022*$6,000

*each year

Contribution deadlines

There are no TFSA deadlines as unused contribution room carries forward to future years, and you gain additional contribution room as of January 1st each year. Withdrawals from TFSAs become available contribution room the following tax year.

Excess contributions

Once your maximum contribution limit is reached, any additional amount you add to your TFSA is considered an excess contribution. If the excess amount is not withdrawn, you will have to pay a 1% tax penalty each month the excess remains in your TFSA.

How do withdrawals affect my contribution room?

As previously noted, withdrawals from TFSAs become available contribution room the following tax year. For example, if you had maxed out all available contribution room to your TFSA and you withdrew $4,000 in September of this year, you can recontribute the $4,000 January 1st of the following tax year, along with the available contribution room for the following year. 

How can I make contributions to my Edward Jones account?

You may contribute to your TFSA one of the following ways:

  • Deposit a cheque
  • Electronic funds transfer (EFT) from your bank account
  • Pre-authorized contribution from your account.
  • Transfer cash or securities from a non-registered Edward Jones account; however, if you transfer securities, the Canadian government will deem that you sold the securities at the fair market value, which may require you to pay interest, dividends and/or capital gains tax owing at the time of contribution. If your investment in your non-registered account is down in value you could consider tax-loss selling the investment in your non-registered investment to then offset another capital gain.  Tax-loss selling involves selling an investment that has decreased in value to offset a capital gain on an investment that has increased in value. This strategy is an excellent opportunity to use those investments that are expected to underperform to offset realized capital gains before the market rebounds.   

TFSA withdrawals

There are no required withdrawals from a TFSA, and no taxes paid when you withdraw from a TFSA. You can utilize a TFSA for any purpose, such as vacations, buying a house or paying for your child's post-secondary school tuition. Discuss what is important to you with your Edward Jones financial advisor who will help you determine if a TFSA is right for you. 

Good to know TFSA withdrawal facts

  • There are no withdrawal fees charged, other than any applicable commissions from the selling of securities.
  • Withdrawals from TFSAs become available contribution room the following tax year. Since contributions are made from after-tax income, TFSA contributions are not tax deductible. However generally there will be no tax when you withdraw funds. There are certain exceptions when tax may be payable on a TFSA please visit for full details.
  • No mandatory withholding is required for non-residents’ withdrawals.
  • Partial Deregistration – taking a portion of the assets from the account (requires $60 to be left in your TFSA).
  • Withdrawals can be completed in CAD and/or USD.


Funds within a TFSA and TFSA withdrawals are generally not taxable. Tax liability generally occurs if the amount of your contributions exceeds the maximum amount of your contribution room, non-residency or non-qualified investments. For additional details visit

Impact on eligibility of government benefits

Take comfort in knowing that withdrawing funds from your TFSA, as well as any investment income earned from your TFSA, will not negatively affect your eligibility for government benefits, including Old Age Security (OAS), Guaranteed Income Supplement (GIS) or the Canada Child Benefit (CCB).

Estate considerations

TFSAs can name a successor holder, primary beneficiary or contingent beneficiary to receive the assets from the TFSA in the event of your passing, in those provinces and territories that recognize named beneficiaries. The Government of Canada defines the term successor holder as a spouse or common-law partner. One important distinction between a successor holder and a primary or contingent beneficiary is that a beneficiary would receive the money; however, the successor holder receives the account. The successor holder can take over ownership of the deceased’s TFSA account, without affecting their own contribution room. The successor holder can then add the TFSA from the deceased party to their own TFSA or withdraw the funds, after they receive the assets, without affecting their own contribution room or paying tax on the withdrawal. In future years, the successor holder is able to continue to contribute up to the maximum available contribution room. When a successor holder is named, the assets pass outside of the estate, and no probate taxes are applicable. As per the Government of Canada, "A designated beneficiary will not have to pay tax on payments made out of the TFSA, as long as the total payments do not exceed the FMV (Fair Market Value) of all the property held in the TFSA at the time of the holder's death.”  Naming beneficiaries also allows you to direct the proceeds of your account in the event of your death and allows Edward Jones to easily identify to whom the account proceeds will be paid. 

TFSA vs. RRSP: What’s the difference?

Text: If you are a new investor, you may be trying to figure out the similarities and the differences between a TFSA and a Registered Retirement Savings Plan (RRSP).

Both offer tax advantages, and both allow you to invest in the same types of investments: stocks, bonds, GICs, mutual funds, exchange traded funds (ETFs) etc.

But there are important differences. You can use a TFSA for any long- or short-term investment goal, while an RRSP is mainly intended for retirement. Additionally, TFSA withdrawals are tax-free, while RRSP withdrawals are added to your taxable income.

If you’re trying to decide which one is right for you, consider your specific circumstances: your goals, your time frame to accomplish those goals, your risk tolerance and your full portfolio. Your Edward Jones Financial Advisor can help you every step of the way.

The following chart helps explain some of the additional similarities and differences.

The following chart helps explain some of the additional similarities and differences.



Annual contribution limitCurrently set at $6,500 for 2023 regardless of your earned income.The lesser of $30,780 or 18% of earned income, less pension adjustment for 2023.
Maturity dateNoneYou must convert by the last day of the year in which you turn 71 to a Registered Retirement Income Fund (RRIF) or payout annuity.
Tax-deductible contributionsNoYes, it reduces your taxable income at the time of the contribution.
Tax on withdrawalsContributions and investment income are withdrawn tax-free.The sum taken out will be added to your annual income for tax purposes. Applicable marginal tax rate applies.
Impact on eligibility for government benefits, such as the Canada Child Tax Benefit (CCTB was replaced in 2016 -- it’s now the Canada Child Benefit (CCB), Old Age Security (OAS) or the Guaranteed Income Supplement (GIS)NoYes
Contribution room restored after withdrawalsYes, added back at the beginning of the following year.No
Ability to carry forward unused contribution roomYesYes
Penalty for exceeding contribution limits1% per month1% per month if exceeding RRSP limit by more than $2,000 (exceptions apply)
Spousal contributionsGifted amounts from a spouse can be contributed by TFSA account holder; however, the Income Tax Act does prohibit anyone other than the account holder from contributing to your TFSA.Allowable to a Spousal RRSP, 3-year attribution rule applies.

Which is better?

Choosing between a TFSA and an RRSP depends on your current situation and your anticipated tax rate when you plan to withdraw funds. The income from an RRSP becomes part of your earned income and taxed at your marginal income tax rate at that time. Also, as the RRSP withdrawal is part of your earned income, it will affect income tested government benefits, such as Old Age Security (OAS). To help illustrate this point, the table below compares the two accounts. The example assumes you made a one-time contribution into each plan that you then held for 20 years with a 40% marginal tax rate.


Employment Income (maximum contribution)$ 6,000$ 6,000
Taxes owing (40% rate)$ 2,400$ 2,400
Tax refund from contribution$ 0$ 2,400
Net contribution$ 3,600$ 6,000
Account value in 20 years (assuming 6% return rate)$11,546$19,243
Tax at withdrawal (40% rate)$ 0$ 7,697
Net Proceeds$11,546$11,546

In this scenario, both accounts have:

  • Identical investments
  • The same tax rate at the time of contribution and withdrawal
  • Equally effective tax-savings alternatives

If you believe your income tax rate will be lower by the time you make a withdrawal, you may want to consider an RRSP. On the other hand, if your tax rate could be higher when you make a withdrawal, a TFSA may be the better choice. Your Edward Jones financial advisor working with your tax professional can determine which investment vehicles are the right fit for your unique circumstance.

We can help

At Edward Jones, our financial advisors are committed to helping you throughout your lifelong journey.  Visit Edward Jones to be paired with a Financial Advisor in your area who will work with you to understand your values and the reasons behind your goals – and what is most important to you.