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InvestmentsDemystifying The TFSA


This article was reviewed by Jay Brecknell, CFP®.

How to best use this investment account

What is a Tax-Free Savings Account (TFSA) and how can you benefit from it?

Since it was launched back in 2009, financial advisors and institutions have added a new investment acronym, TFSA. While there has been lots of discussion and advertising about TFSAs, it still seems that there is confusion about how to best use this tool.

Facts & Tips:

1. As of 2013, your contribution room would be $25,500 per person as long as you were older than 18 years old in 2009 and had never contributed to the plan.

2. Do you have non-registered investments? If so, you should look at maximizing your TFSA room to tax shelter the investments you have. People often overlook the potential tax savings from moving existing non-registered investments to a TFSA account. Please note that this can trigger tax on your non-registered investment so you would want to have this looked at by a professional.

3. What are the best investments to own in a TFSA account? First off, it should fit with your overall investment strategy. Typically you should own any interest bearing investments such as GICs or bonds in your tax-sheltered accounts as they are taxed higher than other investments.

4. Withdrawals made from your TFSA account will be added back to your TFSA contribution room at the beginning of the following year. Great news! If you have withdrawn money from your TFSA it will increase your contribution room for future years.


  • As of January 1, 2013, Canadian residents, age 18 and older, can contribute up to $5,500 annually to a TFSA. This is an increase from the annual contribution limit of $5,000 for 2009 through 2012 and reflects indexation to inflation.
  • Investment income earned in a TFSA is tax-free.
  • Withdrawals from a TFSA are tax-free.
  • Unused TFSA contribution room is carried forward and accumulates in future years.
  • Contributions are not tax-deductible.