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Last updated: February 9, 2024 | Reviewed by Stuart Dollar

What is a tax-free savings account?

A TFSA is a registered investment account designed to help Canadians save money, while holding qualified investments. More than just a typical savings account, a TFSA can hold a variety of different investment types, such as mutual funds, segregated funds, insurance GICs and more.

Unlike a registered retirement savings plan (RRSP), which is typically used for long-term investments, a TFSA provides flexibility. It can be used for short-term savings goals, such as saving for a car or a down payment for your first home.

Table of contents: 

  1. What is a tax-free savings account?
  2. How does a tax-free savings account work?
  3. Who can open a TFSA?
  4. Benefits of investing in a TFSA
  5. Additional resources
  6. Frequently asked questions
  7. Get started with a TFSA

How does a tax-free savings account work?  

If you’re a Canadian resident 18 years or older with a Social Insurance Number (SIN), you can open a TFSA. Please note that you cannot open a mutual funds account under the age of 18 in Canada. Once you’ve opened your TFSA and started contributing, your investments have a chance to grow tax-free.

Any income earned within a TFSA, including interest, dividends and capital gains is tax-free. What’s more, you won’t have to pay tax on any withdrawals.

Who can open a TFSA?

You must be a Canadian resident, aged 18 or older with a Social Insurance Number (SIN). Any person under the age of 18 cannot open a mutual funds account.

According to the Government of Canada, you may be able to open a TFSA if you’re a non-resident of Canada with a SIN and age 18 or older. However, it may not be advisable because any contributions you make as a non-resident will be subject to a 1% tax for each month the contribution stays in your account. Additional taxes may also apply for non-residents.

Speak to a tax specialist or a Sun Life advisor to learn more and determine if a TFSA is right for you.

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Benefits of investing in a TFSA

   Tax-free growth

   Tax-free withdrawals

   Save money for any reason

What is a TFSA?

Simply put, a tax-free savings account, or TFSA, is a type of savings account to help save for any need.

How does a TFSA work?

A TFSA doesn’t have to be a savings account at a bank. A TFSA can contain a variety of investments like:

  • Bonds
  • Stocks
  • Mutual funds, and
  • Exchange-traded funds

Money, or contributions, that you put into a TFSA, are made with after-tax dollars. This means you’ve already paid income tax, and won’t need to pay again when you make withdrawals in the future. Plus, you won’t pay tax on any investment growth in your TFSA.

Whether you’re saving for a dream vacation, your first home, or your retirement, a TFSA can help.

What is your TFSA contribution limit? 

A contribution limit is the maximum amount you can add to your TFSA each year. The annual  TFSA contribution limit varies from year to year. The federal government determines these limits.

You’re entitled to the lifetime contributions for every year after you turn 18 and are a Canadian resident. For example, let’s say you don’t have a TFSA and were 18 in 2009, when the government introduced the TFSA. In this case, if you were a Canadian resident throughout that entire time, you’d have full contribution room available. But if you became a Canadian resident in 2015, you’d start gaining contribution room then. The best way to find out how much you can contribute to your TFSA is through the Canada Revenue Agency.

Whenever you need it, a TFSA is a smart way to save, and see your savings grow – tax-free.

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Additional resources

TFSA contributions

The TFSA contribution limit for 2024 is $7,000. But the total amount you can contribute really depends on your personal TFSA contribution room.

How TFSA contributions work

TFSA withdrawals

You can withdraw from your TFSA whenever you want, for any purpose. But you’ll want to check if the investments within your TFSA have any withdrawal restrictions.

How TFSA withdrawals work

Our advisors are ready to help you open a TFSA and offer customized advice that meets your specific needs.

They can also answer any questions you may have. 

Enter your postal code to find an advisor near you. 

Frequently asked questions

Can I use a TFSA to buy a house?

Yes. You can use the funds in your TFSA for any reason, including making a down payment on a home.

Keep in mind that you may also be able to use a Home Buyers Plan (HBP) through your RRSP or a First Home Savings Account (FHSA).

What’s the difference between using a TFSA and using an RRSP to buy a house?

Withdrawals from a TFSA are tax-free, whereas RRSP withdrawals are taxable, unless you’re making RRSP withdrawals under the Home Buyer’s Plan (HBP).

Speak with a Sun Life advisor to find out what works best for you

Can I withdraw money from my TFSA?

You can withdraw any amount from your TFSA, at any time. Some withdrawal restrictions and limitations may apply to certain investments. For example, depending on your investments, you may not be permitted to make withdrawals until the end of a specific term.

Connect with a Sun Life advisor for more detailed information

Do you pay taxes on a TFSA?

Your TFSA contributions are made from after-tax income. This means that you’ve already paid tax on the money that’s deposited into a TFSA. You won’t have to pay tax on any income earned (e.g., interest, dividends, and capital gains) within a TFSA.  And, you won’t have to pay tax when you withdraw those funds.

However, please note that your TFSA contributions aren’t tax deductible. This means you can’t use your TFSA contributions to reduce your overall tax bill when you file your tax return.

Can I open a TFSA for my kids?

No, you can’t open a TFSA for your child. Your children can open their own TFSAs when they reach age 18, at which point, you can give them the funds to put in the account. However, there are other ways to save money for your children’s future. For example, if you’re looking to save for your child’s future education or training, you can open a registered education savings plan (RESP) on their behalf.

Can I have a joint TFSA with my spouse?

No, a TFSA can be registered only in one person's name.

Can I contribute to my spouse's TFSA?

No, you can’t contribute directly to your spouse or common-law partner’s TFSA. The account holder is the only person who can make contributions and withdrawals.

However, you can give your spouse or common-law partner money that they can contribute to their own TFSA.

What happens to my TFSA after death?

After you die, your TFSA funds will either go to your estate, a designated beneficiary, or a successor holder. A beneficiary gets the money within the account, while a successor holder can take over the entire account.

You can name anyone as your beneficiary, but only a spouse or common-law partner can be a successor holder. If you don’t have a beneficiary or successor holder, your account will go to your estate.

If you’re a resident of Québec, please note that you can only name a beneficiary or a successor owner to a TFSA held in an insurance product, such as a segregated fund contract or an Insurance GIC.

Learn more about the differences between a beneficiary and a successor holder

Is a TFSA taxable upon death?

No, it's not taxable upon death

What is the TFSA contribution limit for Canada?

The TFSA contribution limit for 2024 is $7,000, plus any unused contribution room from previous years.

Can you transfer a TFSA funds to another TFSA?

Yes, you can transfer funds from one TFSA to another, if you are the owner of both TFSAs.

Can you transfer a TFSA to another person?

No, you can't transfer your TFSA to another person

Is a TFSA subject to probate?

If you don’t name a successor holder or beneficiary for your TFSA, then it may be subject to probate after you die.

Probate is a legal process that confirms the validity of a will and the appointment of an executor (who carries out the terms of your will). Many estates will need probate if there are assets that need to be distributed. If you don’t have a will, then the court will appoint an estate administrator.

Get answers to more frequently asked questions about probate

How many TFSAs can I open?

You can open as many TFSAs as you want. Keep in mind that regardless of the number of TFSAs you hold, you can’t contribute more than your TFSA contribution room.

So be careful not to exceed your TFSA contribution room. Otherwise, you will face a tax penalty for over-contributions to your TFSAs.

Please remember that it’s up to you to know and monitor your contribution limits. You can find your TFSA contribution room by logging into “My Account” on the Canada Revenue Agency’s (CRA) website. Alternatively, you can call the CRA directly.

Get started with a TFSA

Open a TFSA

Talk to a Sun Life advisor to open a TFSA and start investing. An advisor can answer your questions and help you make the most of your savings.

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1The TFSA contribution limit has changed over the years. 2009-2012 - $5,000; 2013-2014 - $5,500; 2015 - $10,000; 2016-2018 - $5,500; 2019 - $6,000.  For future years, the amount may be increased in increments of $500 to correspond with the rate of inflation.

2Beneficiary designations are not permitted in Quebec for GIC or mutual fund TFSAs.