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Tax-Free Savings Accounts (TFSAs)
A Tax-Free Savings Account (TFSA) is a registered savings plan that allows taxpayers to earn investment income tax-free inside the plan. Contributions to the plan are not tax-deductable and withdrawals of contributions and earnings from the plan are not taxable.
You can hold a variety of investments inside a TFSA, including mutual funds, publicly traded securities, GICs, bonds and certain shares of small business corporations.
As of January 1, 2009, all Canadian residents age 18 and over are eligible to contribute to a TFSA. You can contribute up to $5,000 per year with contribution limit increases in subsequent years subject to inflation.
Your contribution limits are not determined by income (Canada Revenue Agency will determine and inform you of your contribution room on your Notice of Assessment). Unused contribution room can be carried forward from year to year.
Your contribution does not impact your annual RRSP contribution limit, as contributions to a TFSA are not tax-deductible.
All income earned in your TFSA, whether interest or other investment income or gains, is tax-free.