Tax-Free Savings Account (TFSA)

A tax-free savings account allows you to earn interest tax-free. This means you can withdraw your earnings without incurring taxes or affecting your eligibility for income-tested benefits or income tax credits.

You can deposit a total of $5000 each year to all of your tax-free savings accounts at all financial institutions combined. The yearly limit is set by the federal government and will be indexed to inflation. If you don't use all of your allowance in a particular year, the remaining allowance is carried forward to future years and accumulates.

You can set up a savings account, GIC, or mutual fund as a TFSA, and you can pledge your TFSA as security on a loan. If you set up a GIC as a TFSA, it's eligible for DICO deposit insurance with no maximum limit. You can use Direct deposit and payroll deduction to make regular contributions to your TFSA.

For more information, read All About the TFSA or the Canada Revenue Agency's TFSA Information for Individuals.

You should consider a TFSA if...

• You have savings or investments that are not tax-sheltered.
• You want to save for a short-term goal (such as a down payment, home renovation, travel, vehicle purchase, or educational expenses), while retaining access to your money.
• You prefer to invest conservatively using products like savings accounts and GICs.
• You have maximized your RRSP contributions and are looking for another tax-sheltered investment.
• You are a retiree who wishes to continue growing their tax-free income, or wishes to shelter unused withdrawals from a RRIF.
• You wish to offset RRSP contribution room that was lost due to pension adjustments.
• You are looking to downsize your home and wish to tax-shelter the proceeds of the sale.
• You are planning to start a small business and wish to grow your seed capital tax-efficiently.