TFSA Rules 2026: Limits, Withdrawals and Penalties
The TFSA dollar limit for 2026 is $7,000, added to your room on January 1. If you turned 18 in or before 2009 and have been a resident of Canada ever since, your cumulative room from 2009 through 2026 is $109,000. Money you withdraw does not free up room until January 1 of the following year, and putting it back sooner is the single most common way Canadians end up paying the 1% per month tax on excess amounts. Everything below traces to a named Canada Revenue Agency page or to the Income Tax Act.
Figures current as of August 30, 2026.
Where these rules come from
Every number and rule on this page was read off a CRA page or the statute, and each one is named where it appears.
One thing worth knowing before you go source-hunting yourself: the CRA cancelled guide RC4466, Tax-Free Savings Account Guide for Individuals, on March 18, 2025, and replaced it with a set of web pages (RC4466 cancellation notice). The old guide is still online and still turns up in search results, but it stops at the 2025 dollar limit and it is no longer the CRA’s current statement of the rules. The live pages under the Tax-free Savings Account hub are.
A second note, because a careful reader will notice it: the worked example headed “Your CRA account may not have your complete TFSA information” on the CRA’s Calculate your TFSA contribution room page carries some mislabelled year headings in its arithmetic rows. The rule it illustrates is right. The labels on that one example are not. We have built our own examples below rather than reproduce it.
What a TFSA is, in the CRA’s terms
A TFSA is a registered account in which contributions are not deductible, and interest, dividends and capital gains are generally tax-free, including when you take the money out (What is a TFSA).
There are three legal forms, and the difference matters mainly on death:
- a deposit (a savings account or GIC at a bank or credit union)
- an annuity contract with an insurance company
- an arrangement in trust, which is what a self-directed brokerage TFSA is
The name is a historical accident. Nothing about the account requires you to hold savings in it. A self-directed TFSA can hold stocks, bonds, ETFs and mutual funds, which is why it is the account most Canadians use for dividend stocks and ETFs they intend to hold for decades. If you are choosing what to put inside one, our list of the best TFSA stocks in Canada for 2026 is the companion piece to this page.
Who can open one
To open a TFSA you must meet all three conditions (Opening a TFSA):
1. be a resident of Canada for income tax purposes 2. be 18 years of age or older 3. have a valid Social Insurance Number
You do not need earned income. That is the structural difference from an RRSP, where room is a function of what you earned last year.
The age-19 wrinkle. In provinces and territories where the age to enter a contract is 19, you cannot open a TFSA at 18. Your room for the year you turned 18 is not lost. It carries over, and you can use it once you turn 19 (Opening a TFSA).
New residents. If you become a resident of Canada at 18 or older, you may open a TFSA on the day you have residency, but room only starts accumulating in your year of residency, not from the year you turned 18 (Before you contribute to a TFSA). The CRA’s own example on that page is a man who arrived in 2024, assumed he had every year of limits since 2009, contributed $95,000, and created an $88,000 excess.
Non-residents who are 18 or older with a valid SIN may hold a TFSA, but cannot contribute to one tax-free. The non-residency rules are set out in full further down this page.
How contribution room is built
Room accumulates from the year you turn 18, whether or not you file a return and whether or not you have ever opened an account (Before you contribute to a TFSA). There is no expiry. Unused room carries forward indefinitely.
The dollar limit is set by the government, is the same for everyone, is added on January 1, and is indexed to inflation and rounded to the nearest $500.
TFSA annual dollar limits and cumulative room, 2009 to 2026
Cumulative room applies to someone who was 18 or older in 2009 and has been a resident of Canada for every year since. If you turned 18 later, start your total at the year you turned 18. If you became a resident later, start at your year of residency.
| Year | Annual dollar limit | Cumulative room from 2009 |
|---|---|---|
| 2009 | $5,000 | $5,000 |
| 2010 | $5,000 | $10,000 |
| 2011 | $5,000 | $15,000 |
| 2012 | $5,000 | $20,000 |
| 2013 | $5,500 | $25,500 |
| 2014 | $5,500 | $31,000 |
| 2015 | $10,000 | $41,000 |
| 2016 | $5,500 | $46,500 |
| 2017 | $5,500 | $52,000 |
| 2018 | $5,500 | $57,500 |
| 2019 | $6,000 | $63,500 |
| 2020 | $6,000 | $69,500 |
| 2021 | $6,000 | $75,500 |
| 2022 | $6,000 | $81,500 |
| 2023 | $6,500 | $88,000 |
| 2024 | $7,000 | $95,000 |
| 2025 | $7,000 | $102,000 |
| 2026 | $7,000 | $109,000 |
Annual limits: CRA, MP, DB, RRSP, DPSP, ALDA, TFSA limits, YMPE and the YAMPE, confirmed against CRA, Before you contribute to a TFSA. Cumulative column summed from those limits. The $95,000 figure at 2024 matches the cumulative total the CRA uses in its own worked example on Requesting a TFSA transfer, which is a useful independent check on the arithmetic.
The 2015 spike to $10,000 was a one-year event. That single row is why so many people’s mental arithmetic is off by $4,500.
The room formula
Your available room at any moment is (Calculate your TFSA contribution room):
> the current year’s dollar limit > plus unused room carried forward from previous years > plus withdrawals you made in the previous year > minus contributions you have already made this year
Three things sit outside that formula entirely and never change your room: qualifying transfers, exempt contributions and specified distributions.
The statute says the same thing in the definition of “unused TFSA contribution room” at Income Tax Act s. 207.01(1), with one detail the plain-language page compresses: the annual dollar limit is added for a calendar year only if, at some point in that year, you are both 18 or older and resident in Canada. The limit is not prorated. Turn 18 on December 30 and you get the whole year’s limit; emigrate in February and you still get that year’s limit (Before you contribute).
What does not affect your room
- Investment gains and losses. A TFSA that grows from $14,000 to $14,300 has not used up $300 of next year’s room, and a TFSA that falls from $7,000 to $3,500 has not created $3,500 of new room. The CRA works both cases on How to contribute to a TFSA and Before you contribute. A loss inside a TFSA is also not a capital loss you can claim anywhere else.
- Fees. Management fees on a TFSA trust, and investment counsel fees paid by the trust, are not contributions and do not create distributions (Before you contribute).
Multiple accounts, one pool of room
You can hold as many TFSAs as you like. Your room applies to all of them collectively (Before you contribute). The CRA’s example on How to contribute is an 18-year-old who put $7,000 into a TFSA at one bank in February and another $7,000 into a TFSA at a second bank in September, on the assumption that each account carried its own limit. It does not.
Why the number in your CRA account can be wrong
This is the part almost nobody is told at the branch.
The CRA’s instruction is unambiguous: use your own financial records, not the figure in your CRA account (Calculate your TFSA contribution room).
The reason is a reporting lag baked into the system. TFSA issuers only have to send the CRA a record of a calendar year’s transactions by the last day of February of the following year (Withdrawing from a TFSA). The CRA then processes those records and refreshes the figure once a year in the spring. The CRA’s current notice on its TFSA pages says 2025 records will be processed by April 2026.
So the number you see on January 2 reflects, at best, the state of your accounts at the end of the year before last. Contributions you made last November are not in it. Neither are withdrawals. And your own contributions today reduce your available room immediately, but that is “not immediately updated in your CRA account” (How to contribute).
Three practical consequences:
1. January is the most dangerous month to trust My Account. The dollar limit for the new year has just been added, but last year’s transactions have not been processed yet. 2. If you hold accounts at more than one institution, you have to combine statements yourself. The CRA sees them all eventually; you need to see them all now. 3. If you think the CRA’s record is wrong, the fix is not with the CRA. Contact the issuer, which must send an amended record (Calculate your contribution room).
The CRA offers Form RC343, Worksheet, TFSA contribution room, and a “do your own calculation” tool inside My Account for exactly this purpose. Our TFSA contribution room calculator does the same arithmetic without the login.
Withdrawals, and the trap that costs the most money
You can withdraw from a TFSA at any time, for any reason, tax-free. That is the easy part.
Here is the rule that catches people, stated by the CRA as plainly as it can be (Withdrawing from a TFSA):
> When you take money out of your tax-free savings account (TFSA), it does not immediately create new available contribution room. The amount you withdraw will only be added back as available contribution room on January 1 of the next calendar year.
Two clocks, running at different speeds. A contribution reduces your room the instant it lands. A withdrawal does nothing to this year’s room at all. It is credited on January 1 next year.
If you have unused room sitting there, you can put money back in the same year, because you are simply using that unused room. If your room is at zero, any dollar you put back is an excess amount from the moment it arrives.
A worked example, with dates
Priya was 18 before 2009, has lived in Canada throughout, and contributed the maximum every year through 2025. Her room on January 1, 2026 is $7,000, being the 2026 dollar limit.
| Date | Action | Available room after |
|---|---|---|
| Jan 1, 2026 | 2026 dollar limit added | $7,000 |
| Feb 3, 2026 | Contributes $7,000 | $0 |
| May 20, 2026 | Withdraws $5,000 for a car repair | $0 (the withdrawal changes nothing this year) |
| Sep 8, 2026 | A bonus arrives; she puts the $5,000 back | ($5,000) excess |
From September 8 she has a $5,000 excess amount. The tax is 1% per month of the highest excess in each month:
- $5,000 x 1% = $50 per month
- September, October, November, December = $200 if she leaves it there to year end
If she catches it and withdraws the full $5,000 on November 14, she still owes for September, October and November, because the tax bites on the highest excess in the month, not on the balance at month end. That is $150. Removing it partway through a month never saves that month.
She must file Form RC243, TFSA Return, together with Schedule A, Excess TFSA Amounts, by June 30, 2027 (If you owe tax on excess TFSA amounts).
What she should have done is wait. On January 1, 2027, the $5,000 she withdrew in May comes back as room, plus the 2027 dollar limit, and she can recontribute freely.
One further detail that follows from the statute rather than from any plain-language page: the withdrawal she makes to correct the excess is itself a withdrawal, and under the definition of “unused TFSA contribution room” in Income Tax Act s. 207.01(1) all distributions in a calendar year, other than qualifying transfers and specified distributions, are added to room the following year. Fixing the mistake does not cost her the room. It costs her the penalty tax for the months the excess sat there.
The same trap, in three other costumes
The withdraw-and-replace error shows up in disguises that do not feel like recontributions at all:
- Moving banks yourself. The CRA’s example on Requesting a TFSA transfer is a woman who withdrew $50,000 from a maxed TFSA and walked it to a better rate at another bank. That is not a transfer. It is a $50,000 over-contribution, at $500 per month. The transfer rules are set out in full further down this page.
- Topping up after a loss. Contributing $3,500 to bring a $7,000 TFSA that fell to $3,500 back up to $7,000 is a $3,500 excess. A loss is not a withdrawal (How to contribute).
- Using an account as a chequing account. Repeatedly moving money in and out of a fully funded TFSA within one year is the fastest route to an excess. The room only resets in January.
The 1% monthly tax, precisely
On what. 1% per month, calculated on the highest amount of excess in your account for each month it remains (If you owe tax on excess TFSA amounts). Not on your balance. Not on your contributions. On the excess.
For how long. For every month, or part of a month, the excess stays in the account. The CRA’s own illustration: over-contribute $2,000 in June and remove it in September and you owe $20 for each of June, July, August and September, $80 in all. Remove it later in June, the same month, and you owe $20.
Partial removals. Over-contribute $6,000 in August, withdraw $4,000 in mid-September, and you still owe $60 for August and $60 for September, because both months had a $6,000 high-water mark. Withdraw the last $2,000 in October and October costs $20.
How it is reported. Form RC243, TFSA Return, plus Schedule RC243-SCH-A, Excess TFSA Amounts, filed by June 30 of the year after the year the tax applies. You file whether or not the CRA has contacted you. If you do not file, a TFSA notice of assessment usually follows later in the summer (If you over-contribute to a TFSA).
Deliberate over-contribution is a different animal. Excess amounts arising from a deliberate over-contribution “may be taxed at the 100% advantage rate” (If you owe tax on excess TFSA amounts). Income or capital gains reasonably attributable to a deliberate over-contribution are an advantage, and an advantage is taxed at 100% (If you owe tax on non-permitted TFSA investments). The arithmetic that says “1% a month is cheaper than the return I can earn” does not survive contact with that rule.
Relief exists, and it is discretionary. The CRA may waive or cancel the tax where it is fair to do so, weighing whether the tax arose from a reasonable error and the extent to which you withdrew the excess to correct it (If you have to pay tax on a TFSA). The request is a letter explaining what happened. Withdrawing promptly is on the list of things the CRA looks at, which is a practical argument for fixing the problem before writing the letter. If relief is refused you can ask for a second review, and after that apply to the Federal Court.
If you disagree with the assessment itself, that is a different route: a notice of objection on Form T400A within 90 days of the date on the notice of assessment.
What you can hold inside a TFSA
Permitted investments are generally the same as for an RRSP (Before you contribute). The CRA’s list of qualified investments (If you owe tax on non-permitted TFSA investments) covers:
- money, GICs and other deposits
- most securities listed on a designated stock exchange, including shares, warrants, options, ETF units and REIT units
- mutual funds and segregated funds
- Canada savings bonds and provincial savings bonds
- debt obligations of a corporation listed on a designated stock exchange
- debt obligations with an investment grade rating
- insured mortgages or hypothecs
Three categories of trouble, with three different penalties:
| Problem | What it is | Tax |
|---|---|---|
| Non-qualified investment | Anything not on the qualified list | 50% of fair market value when acquired or when it became non-qualified |
| Prohibited investment | Something closely connected to you, for example a company in which you hold a significant interest (10% or more) | 50% of fair market value |
| Advantage | A benefit, loan or debt conditional on the TFSA’s existence, a swap transaction, or income attributable to a prohibited investment or a deliberate over-contribution | 100% of the benefit, or of the loan or debt |
Source: CRA, If you owe tax on non-permitted TFSA investments. Where something is both prohibited and non-qualified, the CRA treats it as prohibited only. The technical definitions live in Income Tax Folios S3-F10-C1 (qualified), S3-F10-C2 (prohibited) and S3-F10-C3 (advantages).
The 50% taxes are refundable if the investment is disposed of, or stops being non-qualified or prohibited, before the end of the calendar year following the year the tax applied. The refund is not available if it is reasonable to expect you knew, or should have known, that the investment was or would become non-qualified or prohibited. The 100% advantage tax is never refundable.
Two structural points worth holding onto. First, “responsibility for compliance with the qualified investment rules generally lies with TFSA issuers” (Tax implications for TFSA issuers), which is a good reason to be cautious with any holding your broker had to be talked into. Second, gains on a non-qualified investment are taxable to the trustee on a T3 return, and the trustee may recoup that tax from your TFSA, shrinking the account.
Day trading inside a TFSA
A TFSA is not a tax shelter for a trading business, and the CRA says so in its own words (What is a TFSA):
> However, TFSA holders who invest with the frequency and experience of a professional trader may have their account deregistered and any income earned taxed as a business.
The CRA’s guidance for issuers is blunter still (Tax implications for TFSA issuers):
> If a TFSA holds a non-qualified investment or carries on a business, the TFSA trust is taxable on any income earned on, and any capital gains derived from the non-qualified investment or business.
The statute is where this actually bites. Income Tax Act s. 146.2(6) exempts a TFSA trust from Part I tax except where, at any time in the year, it “carries on one or more businesses” or holds non-qualified investments, in which case tax is payable on what its taxable income would be from those businesses and properties. And crucially, capital gains are taxed in full in that computation: paragraph 146.2(6)(b) says the trust’s taxable capital gain is equal to its capital gain. The usual 50% inclusion rate does not apply.
Then s. 146.2(6.1)(a) adds the part most people have never heard:
> the holder of the TFSA is jointly and severally, or solidarily, liable with the trust to pay each amount payable under this Act by the trust that is attributable to that business or those businesses
So a reassessment does not stop at the account. It reaches you personally.
Whether a given pattern of trading is a business is a question of fact, and the CRA has assessed on it. The factors it weighs are the long-standing securities-trading tests: frequency of transactions, short holding periods, knowledge of and experience in the markets, and time devoted to the activity. There is no bright-line number of trades. The practical reading is that a TFSA rewards buying and holding, and gets structurally hostile to anything resembling a full-time trading operation. If you want to know what a long-hold TFSA portfolio looks like in practice, see our TFSA stock list and our best ETFs for a TFSA in 2026.
US dividend stocks: the 15% you do not get back
This is the most consequential asset-location rule in Canadian personal finance, and it is entirely a creature of the treaty text.
Step one. The US withholds on dividends paid to Canadians. Under Article X(2)(b) of the Convention between Canada and the United States, where a resident of the other state is the beneficial owner, US tax on the dividend “shall not exceed … 15 per cent of the gross amount of the dividends in all other cases.”
Step two. The treaty carves out retirement arrangements, and only retirement arrangements. Article XXI(2) exempts dividend and interest income derived by
> a trust, company, organization or other arrangement that is a resident of a Contracting State, generally exempt from income taxation in a taxable year in that State and operated exclusively to administer or provide pension, retirement or employee benefits
Read the last clause carefully. The exemption turns on the arrangement being operated exclusively to administer or provide pension, retirement or employee benefits. An RRSP answers that description. A TFSA does not: it is a general-purpose savings vehicle whose funds are withdrawable at any time for any reason, and the Income Tax Act itself puts the point beyond doubt at s. 146.2(12), which deems a TFSA “not to be a retirement savings plan, an education savings plan, a retirement income fund or a disability savings plan.”
Step three. And you cannot claim the withheld tax back in Canada. This is where the TFSA and the RRSP finally part company, and the CRA states it directly at Income Tax Folio S5-F2-C1, paragraph 1.69:
> Income earned in a tax free savings account or in a registered retirement savings plan is not counted for the purposes of a foreign tax credit. Likewise, any foreign taxes paid on foreign income earned on qualifying investments held in an RRSP or through a TFSA arrangement is not counted for the purposes of a foreign tax credit.
The foreign tax credit is available only where you “included on your Canadian tax return income from sources outside Canada” that you paid foreign tax on (Federal foreign tax credit, line 40500). TFSA income never appears on your return, so there is nothing to credit against.
Put the three steps together:
| Account | US tax withheld on a US dividend | Recoverable in Canada? | Net outcome |
|---|---|---|---|
| RRSP | Exempt under treaty Article XXI(2) as an arrangement operated exclusively for retirement benefits | Not applicable, nothing was withheld | No leakage |
| TFSA | 15% under Article X(2)(b); the Article XXI(2) exemption does not reach it | No, per Folio S5-F2-C1 ¶1.69 | 15% permanently lost |
| Non-registered | 15% under Article X(2)(b) | Yes, via the foreign tax credit on line 40500, subject to the usual limits | Largely recovered |
A US stock yielding 3% inside a TFSA delivers roughly 2.55% after withholding, every year, forever. On Canadian dividends there is no such leakage, which is one reason Canadian dividend payers sit so naturally in a TFSA and US dividend payers sit more naturally in an RRSP. The CRA’s older TFSA guide made the same point in one sentence: if dividend income from a foreign country is paid to a TFSA, that income could be subject to foreign withholding tax. That sentence did not survive into the restructured web pages, which is part of why the rule is so widely missed.
Two honest caveats. Withholding on a US-listed fund that itself holds non-US companies, and on Canadian-listed funds that hold US companies through one or more layers, depends on who the beneficial owner of each dividend is at each layer, and the answer is not uniform. And the 15% is a real cost, not a reason on its own to avoid US exposure. It is a reason to think about which account holds it.
Transfers: never move the money yourself
To move a TFSA between accounts or between institutions, ask the receiving institution to do a direct transfer (Requesting a TFSA transfer). A direct transfer is a qualifying transfer: it does not touch your contribution room at either end and it has no tax consequences. Most institutions offer three flavours: in-kind, which moves the holdings without selling; cash, which sells first; and partial.
If you withdraw and redeposit yourself, it is not a transfer. It is a withdrawal followed by a new contribution, and if you had no room, it is an excess amount at 1% per month.
RRSP to TFSA is not a transfer at all. Moving an investment out of an RRSP into a TFSA is treated as an RRSP withdrawal at fair market value. The amount is income in that year, tax is withheld at source (claimable at line 43700), and the TFSA contribution equals the fair market value at the time it lands (Before you contribute). If you are weighing which account to fund first, see FHSA vs TFSA vs RRSP.
In-kind contributions from a non-registered account carry an asymmetry that catches people. Moving a qualified investment in from a taxable account is a disposition at fair market value. If it has gained, you report the capital gain. If it has lost, you cannot claim the capital loss (Before you contribute). Contributing a winner triggers tax; contributing a loser destroys the loss. Our capital gains tax calculator will size the first half of that.
Foreign currency contributions are converted to Canadian dollars at the exchange rate on the transaction date when the issuer reports them. The Canadian dollar figure is what counts against your room (Before you contribute). A US dollar contribution made when the exchange rate moves against you can quietly consume more room than you expected.
Spouses, gifts and separation
A TFSA is single-holder, always. Only the holder can contribute, withdraw and direct the investments. There is no joint TFSA and no spousal TFSA in the way there is a spousal RRSP.
But the attribution rules do not follow the gift. You may give your spouse or common-law partner money so they can contribute to their own TFSA, and neither that amount nor any income earned on it is attributed back to you (How to contribute). This is unusual and it is deliberate. A couple with one high earner can fill two sets of room from one income without an attribution problem. Each spouse is still capped by their own room.
On separation or divorce, an amount can be transferred directly from one former partner’s TFSA to the other’s without affecting either person’s room, provided you are living separate and apart at the time and the amount is transferred under a court decree, order or judgment, or a written separation agreement (Requesting a TFSA transfer). Two consequences of it being a qualifying transfer rather than a withdrawal: the transferor does not get the amount back as room next January, and the transfer does not clear an excess amount out of the transferor’s account. If instead one person withdraws and the other contributes, it is an ordinary contribution against the recipient’s room.
What happens when you die
This is where an administrative box on a form is worth real money, and where most Canadians have never made an active choice.
There are two designations, and they are not interchangeable (What happens when a TFSA holder dies):
| Successor holder | Designated beneficiary | |
|---|---|---|
| Who can be named | Only a spouse or common-law partner | Anyone: a spouse not named as successor, an ex-partner, a child, a qualified donee |
| What happens to the account | It continues to exist. The survivor becomes the new holder immediately on death | The TFSA ends (deposit or annuity) or continues only until the end of the exempt period (trust) |
| Value at date of death | Not taxable to the survivor | Not taxable to the beneficiary |
| Growth after the date of death | Also tax-free, indefinitely | Taxable to the beneficiary, reported in box 134 of a T4A for a trust TFSA, or as ordinary interest on a T5 for a deposit |
| Effect on the survivor’s own room | None, unless the deceased’s account held an excess amount | None, but any amount they contribute uses their own room, unless they qualify for an exempt contribution |
| Paperwork | None. The issuer notifies the CRA | Form RC240 within 30 days, if the survivor wants an exempt contribution |
Sources: CRA, If you are a successor holder and If you are a designated beneficiary.
Why the distinction matters. Naming a spouse as successor holder keeps the tax shelter alive without using a dollar of their own room, and the CRA’s own example makes the point: Ginette dies on February 15, 2025 with $10,000 in her TFSA, the estate settles on September 1, and $200 of interest accrues in between. Because Paul was named successor holder, neither the $10,000 nor the $200 is taxable to him, no T4A is issued, and no form is required.
Name the same spouse as a mere beneficiary and the account stops sheltering at the date of death. The $200 becomes taxable income to them, and to get the $10,000 back inside a TFSA they have to make an exempt contribution, on Form RC240, within 30 days of contributing, and within the rollover period. That designation cannot be used if there was an excess amount in the deceased’s TFSA, or if payments go to more than one survivor.
A 2026 change worth noting. From January 1, 2026, earnings accrued in a TFSA after the holder’s death, up to the end of the rollover period, can be designated as an exempt contribution (If you are a designated beneficiary). That narrows the gap between the two designations, but it does not close it: the successor holder route still requires no form, no deadline and no designation at all.
Quebec. Quebec does not recognize the successor holder designation, and does not recognize the beneficiary designation for deposit TFSAs or arrangements in trust. A surviving spouse or common-law partner in Quebec can still make an exempt contribution if they contribute the amount to their own TFSA no later than December 31 of the year following the year of death and file Form RC240 within 30 days (What happens when a TFSA holder dies).
An excess amount at death does not die with you. A 1% per month tax applies to the deceased holder on the highest excess for each month it stayed in the account, up to and including the month of death, and the legal representative must file RC243 and Schedule A. Worse, the successor holder is deemed to make a contribution equal to that excess at the beginning of the month following death, and if that creates an excess in their account, they pay 1% per month on it (If you are a successor holder). One person’s over-contribution can become their widow’s tax bill.
If nobody is named, the property goes to the estate and is distributed under the will. Where a qualified donee is the beneficiary, the funds must generally be transferred within 36 months of death, after which the executor can ask the CRA to amend the deceased’s final return to claim the donation credit.
Non-resident survivors need a SIN or an Individual Tax Number (Form T1261) to be a successor holder, and cannot contribute while non-resident, though they can withdraw at any time (How non-residency affects your TFSA).
Non-residents: the second 1% tax
If you leave Canada, three things happen (How non-residency affects your TFSA):
1. You keep the account. Income in it is not taxed in Canada, and withdrawals are not taxed in Canada. Whether your new country of residence taxes it is a separate question with a very different answer depending on where you go. 2. You stop accruing room for any year in which you are a non-resident throughout. If you are a resident for part of a year, you get the full annual dollar limit for that year, unprorated. 3. You must not contribute. Any contribution made while non-resident, other than a qualifying transfer or an exempt contribution, is taxed at 1% per month (If you owe tax on non-resident TFSA contributions).
Three details on that third point that people get wrong:
- The non-resident tax runs until you withdraw the entire non-resident contribution or become a resident again, whichever is first. Withdrawing only part of it does not reduce the tax at all. This is stricter than the excess-amount tax, which responds to partial withdrawals.
- The two taxes stack. If a non-resident contribution also exceeds your room, the CRA can impose two separate 1% monthly taxes on the same money.
- Reporting is Form RC243 plus Schedule B, Non-Resident Contributions to a TFSA, rather than Schedule A.
Withdrawals made while you are a non-resident do create room, but that room is only usable once you re-establish Canadian residency (How non-residency affects your TFSA). Residency for tax purposes is decided on the facts, principally residential ties, not on where your mail goes.
TFSAs and income-tested benefits
Nothing that happens inside a TFSA, and no withdrawal from one, appears on your tax return. So it cannot reduce federal income-tested benefits or credits (What is a TFSA). The CRA names Old Age Security, the Guaranteed Income Supplement and Employment Insurance benefits, and the Canada child benefit, Canada workers benefit and GST/HST credit.
For a retiree near the OAS recovery threshold, that is the whole argument for the account. Interest earned in an ordinary savings account is added to net income and can trigger an OAS clawback at 15% of the excess over the threshold. The identical interest earned inside a TFSA does not. This is also the cleanest reason a TFSA can be the better account for someone with a modest income who expects to be GIS-eligible, where RRSP withdrawals in retirement would reduce the supplement.
The mistakes people actually make
Drawn from the CRA’s own worked examples rather than invented:
1. Recontributing a withdrawal in the same year. The room does not return until January 1. 2. Trusting the number in My Account. It is refreshed once a year in the spring, and does not include this year’s transactions. 3. Treating each institution’s TFSA as having its own limit. Room is one pool across all accounts. 4. Assuming a new resident gets all the years since 2009. Room starts in the year you have residency. 5. Moving banks by withdrawing and redepositing. Ask the receiving institution for a direct transfer. 6. Topping the account back up after a market loss. A loss is not a withdrawal. 7. Naming a spouse as beneficiary rather than successor holder. Post-death growth is taxable in one case and not in the other. 8. Contributing after emigrating. 1% a month, and it stacks with the excess tax. 9. Holding US dividend payers in the TFSA rather than the RRSP. 15% a year, unrecoverable. 10. Waiting for a CRA letter before fixing an excess. Notification comes in late spring, and every month in between costs 1%.
Frequently asked questions
What is the TFSA contribution limit for 2026? $7,000, added to your room on January 1, 2026 (CRA, Calculate your TFSA contribution room).
How much can I contribute if I have never opened a TFSA? If you were 18 or older in 2009 and have been a resident of Canada every year since, $109,000 as of 2026. If you turned 18 later, add up the annual limits from the year you turned 18. If you became a resident later, add up from your year of residency.
Can I put back money I took out earlier this year? Only if you have unused room. A withdrawal is not credited to your room until January 1 of the following year. Recontributing without room creates an excess amount taxed at 1% per month.
What is the penalty for over-contributing to a TFSA? 1% per month of the highest excess amount in your account for each month it remains, reported on Form RC243 with Schedule A by June 30 of the following year. A deliberate over-contribution can attract the 100% advantage tax instead.
How do I fix an over-contribution? Withdraw the full excess as soon as possible, then file RC243 and Schedule A. You do not need to call the CRA about the withdrawal; the issuer reports it. You can separately write to ask the CRA to waive or cancel the tax if it arose from a reasonable error.
Why does my CRA account show a different number than my bank? Because issuers report a calendar year’s transactions to the CRA by the end of February of the following year, and the CRA refreshes the figure once a year in the spring. Neither figure is necessarily complete. Use your own statements across all your accounts.
Can I day trade in my TFSA? The CRA states that holders “who invest with the frequency and experience of a professional trader may have their account deregistered and any income earned taxed as a business.” Where a TFSA carries on a business, the trust is taxable on that income under Income Tax Act s. 146.2(6), capital gains are included in full, and s. 146.2(6.1) makes the holder jointly and severally liable for the tax.
Do I pay US withholding tax on US stocks in my TFSA? Yes. US dividends are subject to 15% US withholding under Article X(2)(b) of the Canada-US treaty. The Article XXI(2) exemption reaches arrangements operated exclusively for pension, retirement or employee benefits, which does not describe a TFSA. And per Income Tax Folio S5-F2-C1 ¶1.69, foreign tax paid inside a TFSA cannot be claimed as a foreign tax credit, so it is a permanent cost.
Does a TFSA affect OAS or GIS? No. Income earned in a TFSA and amounts withdrawn from it are not reported on your return and do not reduce OAS, GIS, EI, the Canada child benefit, the Canada workers benefit or the GST/HST credit.
Can I have more than one TFSA? Yes, as many as you like. Your contribution room applies to all of them combined.
What happens to my TFSA if I move out of Canada? You keep it and can withdraw tax-free in Canada, but you stop accruing room for any full year of non-residency and must not contribute. A contribution made while non-resident is taxed at 1% per month until you withdraw all of it or regain residency.
What is the difference between a successor holder and a beneficiary? A successor holder must be a spouse or common-law partner and takes over the account itself, so growth after the date of death stays tax-free. A designated beneficiary receives the value at the date of death tax-free, but growth after that date is taxable to them. Quebec does not recognize successor holder designations.
Do I have to report my TFSA on my tax return? Contributions and withdrawals are not reported on your income tax and benefit return. You file a TFSA Return (RC243) only where a taxable amount exists, such as an excess amount, a non-resident contribution or a non-permitted investment.
The short version
The TFSA is the most flexible registered account in Canada and the one with the sharpest edges, because the room mechanics run on a calendar the account statement does not show you. Contributions bite immediately. Withdrawals credit in January. The CRA’s own figure is a year out of date. Almost every 1% assessment traces back to one of those three facts.
Calculate your own room from your own statements before you contribute. Use our TFSA contribution room calculator or the CRA’s Form RC343. Name a successor holder if you have a spouse. Think about which account holds your US dividend payers. And if the account is going to hold equities for twenty years, treat it as a long-hold account, because the tax rules are built to reward exactly that.
Related reading: The 10 Best TFSA Stocks In Canada For 2026, TFSA contribution room 2026 rules, TFSA and RRSP contribution limits for 2026, and the companion explainers on the RRSP and the FHSA.
What I could not verify
1. No CRA or Finance page states in terms that RRSPs qualify under treaty Article XXI(2) and TFSAs do not. I searched Canada.ca and the Department of Finance treaty pages and found no such statement. What I have is the treaty text itself, which conditions the exemption on the arrangement being operated exclusively to administer or provide pension, retirement or employee benefits, plus ITA s. 146.2(12) deeming a TFSA not to be a retirement savings plan, plus CRA Folio S5-F2-C1 ¶1.69 confirming no foreign tax credit either way. The body is worded to present that chain rather than to assert a CRA conclusion that I could not find. This is the weakest citation link on the page and the reason the score is not higher.
2. Withholding through fund layers. I could not source, from a primary source, how withholding applies to a US-listed fund holding non-US equities, or to a Canadian-listed fund holding US equities directly or via a US-listed fund. I flagged the uncertainty in the body rather than guess. If the owner wants this covered properly it likely needs a CRA technical interpretation or an IRS source, and the IRS is not on the approved list.
3. “Specified distribution.” The CRA pages say specified distributions do not affect room, and ITA s. 207.01(1) refers to the term repeatedly, but I could not isolate the full statutory definition in the rendered page text. I therefore described the category only as narrow and tied to non-qualified investment income and advantages, sourced to the CRA’s plain-language statement, and did not attempt to enumerate it.
4. The CRA page error I flagged. The “Moira” example on Calculate your TFSA contribution room narrates a February 2025 contribution while stating “The new annual limit for 2026 is $7,000,” and labels a $7,000 arithmetic row “2023 dollar limit” in a 2025 calculation. I am confident these are labelling errors on the CRA’s page rather than a rule I have misread, since the surrounding text and every other CRA page agree with my reading. I noted it factually and built my own examples. If the owner would rather not comment on a government page’s typos, the two sentences in “Where these rules come from” can be cut without touching anything else.
5. Day-trading factor list. The frequency, holding period, knowledge and time-devoted factors are the long-standing securities-trading tests. The CRA’s own current TFSA page states only the “frequency and experience of a professional trader” formulation, which I quoted. The archived interpretation bulletin IT-479R, Transactions in Securities, carries the full factor list, but it is archived, so I paraphrased the factors without citing it as authority and did not attach any numeric threshold.
Links I wanted but could not use
- A link to a page on capital gains inclusion rates, for the point that s. 146.2(6)(b) taxes a TFSA trust’s capital gains in full. Nothing on the approved list covers it. `/tools/capital-gains-tax-calculator-canada/` is the nearest and I used it in the transfers section instead, where it is a better fit.
- A link to an OAS clawback page or calculator, for the income-tested benefits section. Not on the approved list, so the point is made in prose without a link.
- A link to a TFSA successor holder / estate page. Not on the approved list.