What is the TFSA?
A Tax-Free Savings Account shelters all investment growth from Canadian tax. Contributions are not deductible, but withdrawals are entirely tax-free and — uniquely — withdrawn amounts are added back to your contribution room the following calendar year.
The 2026 limit is $7,000, and unused room accumulates from the year you turned 18 or 2009, whichever is later.
Formula & worked example
Tax avoided ≈ growth × 50% inclusion × marginal rate
Worked example: $7,000 a year for 25 years at 6%, starting from $30,000 → roughly $536,000 completely tax-free. About $331,000 of that is growth; in a taxable account, capital gains tax at a 40% marginal rate would cost around $66,000.
How to use this tfsa calculator
- Enter your annual contribution, within your accumulated room.
- Check your exact room on CRA My Account — over-contributing incurs a 1% monthly penalty.
- Use 5–7% for a diversified portfolio.
- Set your marginal rate to see the tax the TFSA saves.
Smart tips
- Withdrawals restore contribution room, but only from 1 January of the following year — re-contributing too early triggers penalties.
- A TFSA is ideal for high-growth investments, since all the upside escapes tax entirely.
- Avoid holding US dividend-paying stocks in a TFSA — withholding tax applies and cannot be recovered.
- TFSA withdrawals do not count as income, so they never claw back OAS or income-tested benefits.
- If your income is low now and will rise, prioritise the TFSA and save RRSP room for higher-earning years.
Frequently asked questions
What is the TFSA limit for 2026?
$7,000 for the year. Unused room accumulates from 2009 or the year you turned 18, whichever is later.
Do TFSA withdrawals affect my contribution room?
Yes — the amount withdrawn is added back to your room, but only on 1 January of the following year.
TFSA or RRSP first?
TFSA if your current tax rate is low or you may need the money. RRSP if you are in a high bracket now and expect a lower one in retirement.
Is TFSA growth really tax-free?
Yes, entirely — no tax on interest, dividends, capital gains or withdrawals. Foreign withholding tax on US dividends is the one exception.
Want the theory behind the numbers? Read our Canada investing guides on the Money Blog.