I’ve been asked a few times if I had a TFSA. That kind of shocked me because I had previously thought that everyone knew about it and was making the most of it. But that’s not the case. A lot of people in Canada haven’t been using this amazing investment vehicle. Maybe because they don’t know how it works or how easy it is to set up.

It’s a registered account that was created in 2009 that can be opened at basically any bank in Canada. You contribute money after it’s already been taxed (it was included in your income) and then whatever you contributed to your TFSA can grow tax free.

That means you’re not taxed on any investments in there (savings, stocks, GICs). A lot of people are just using it as a regular savings account, which I guess is better than nothing but you can keep so many other things in there.

I personally use mine for stocks and ETFs because the capital gains won’t be taxable when I eventually sell them (which is a huge win because the gains can be a lot). The downside is that the capital losses can’t be used. So if I sell a stock that’s lost value when I sell it, then I can’t claim that as a loss on my tax return.

The contribution room for 2025 is $7000 and now in 2025, the max annual contribution limit is $95,000. That’s a lot of money that’s able to grow tax free!

Overcontributions

The only thing is if you overcontribute, then that amount will be subject to tax (1% per month on the excess). You will probably get a warning from the CRA when that happens but always make sure to keep track of the amounts that you’re investing in your TFSA so you don’t overcontribute.

Withdrawals

You also can’t contribute an amount in the same year you withdrew if your TFSA is maxed. So let’s say that for 2025 you contributed the max $7000 and you had to withdraw $5000 of that in the same year. You can’t contribute that $5000 again until 2026 if your contribution room is maxed.

There are other investment vehicles that Canadians can use including Registered Retirement Savings Plans (RRSPs) and First-Home Savings Accounts (FHSA) and I’ll discuss those more later.

More information about TFSAs can be found on the CRA’s website: The Tax-Free Savings Account (TFSA) – Canada.ca