TFSA rules — contributions, withdrawals, and over-contributions
Tax-free savings accounts
Section 146.2 governs Tax-Free Savings Accounts (TFSAs) — accounts where investment income grows tax-free and withdrawals are never taxed, subject to annual contribution limits.
Plain-language explanation
Section 146.2 established the TFSA program, which launched January 1, 2009. Key rules:
How TFSAs work: Contributions are made with after-tax dollars (no deduction). Inside the TFSA, all investment income (interest, dividends, capital gains) grows tax-free. Withdrawals are completely tax-free and do not affect income-tested benefits like OAS or GIS.
Annual contribution limits: - 2009–2012: $5,000/year - 2013–2014: $5,500/year - 2015: $10,000/year - 2016–2018: $5,500/year - 2019–2022: $6,000/year - 2023: $6,500/year - 2024–2026: $7,000/year
Cumulative room to 2026: $102,000 (for someone who was 18+ and resident in Canada in 2009)
Withdrawals add back room: Unlike RRSPs, TFSA withdrawals are added back to your contribution room on January 1 of the following year. You can re-contribute without penalty — just not in the same calendar year.
Over-contributions: CRA charges 1% per month on over-contributions. CRA tracks contributions through T1028 slips from financial institutions. Verify your room at CRA My Account before making large contributions.
Non-residents: Room continues to accumulate while you are a non-resident, but contributing as a non-resident triggers a 1% monthly penalty on the entire non-resident contribution.
Example
Zara turned 18 in 2009 and has been a Canadian resident since. Her cumulative TFSA room is $102,000. She's contributed $70,000 over the years and withdrawn $15,000 (which was added back the next January). Available room: $102,000 − $70,000 + $15,000 = $47,000.
Amendment history
Significant changes to this provision. Older versions help you understand rules that applied in prior tax years.
Annual TFSA contribution limit increased from $6,500 (2023) to $7,000 for 2024 and subsequent years.
Before
$6,500/year (2023)
After
$7,000/year (2024+)
Common questions
What is the TFSA contribution limit for 2026? +
$7,000. The cumulative room if you were 18+ and resident in Canada from 2009 is $102,000 through 2026.
Can I re-contribute money I withdrew from my TFSA? +
Yes, but not in the same calendar year. Withdrawn amounts are added back to your contribution room on January 1 of the following year. If you withdraw $10,000 in October 2026, you can re-contribute that $10,000 starting January 1, 2027.
What penalty applies to TFSA over-contributions? +
1% per month on the excess amount for every month it remains. For example, if you over-contribute by $5,000 for 3 months, the penalty is $5,000 × 1% × 3 = $150.
Key terms
Related sections
Related calculators
Related guides
Source: Income Tax Act, RSC 1985, c. 1 (5th Supp.), section 146.2. — Read the official text on Justice Canada
These summaries are for educational purposes only and do not constitute legal or tax advice. Speak with a CPA for advice on your specific situation.