With TFSA Account , the Tax-Free Savings Account (TFSA), to help you save for different purposes throughout your lifetime. This new registered account is the most important personal savings vehicle for Canadians since the introduction of the RRSP in 1957.
As of January 2, 2009, you are able to start contributing to a TFSA, which can hold any combination of eligible investment vehicles, such as cash, stocks, bonds, GICs and mutual funds, the growth of which will be tax-sheltered.
Your Scotiabank advisor can explain how a TFSA can help you meet your savings and investment goals – whether it’s short term or for future years.
What’s new?
TFSA dollar limit
The annual TFSA dollar limit for 2026 is $6,000. The annual dollar limit is indexed to inflation.
Definitions
Advantage – an advantage is any benefit or debt that is conditional on the existence of the TFSA, subject to certain exceptions for normal investment activities and conventional incentive programs.
An advantage also includes any benefit that is an increase in the total fair market value (FMV) of the property of the TFSA that is reasonably attributable to any one of the following:
- a transaction or event (or series) that would not have occurred in a normal commercial or investment context between arm’s length parties acting prudently, knowledgeably, and willingly, and one of the main purposes of which is to benefit from the tax exempt status of the TFSA
- a payment received in substitution for a payment for services rendered by the holder (or non-arm’s length person) or for a return on investment on non-registered property
- a swap transaction
- specified non-qualified investment income that has not been paid from the TFSA within 90 days of the holder receiving a notice from CRA requiring removal
An advantage also includes any benefit that is income or a capital gain that is reasonably attributable to one of the following:
- a prohibited investment
- a deliberate over-contribution to a TFSA
For more information on advantages, see Income Tax Folio S3-F10-C3, Advantages – RRSPs, RESPs, RRIFs, RDSPs and TFSAs.
Arm’s length – refers to a relationship or a transaction between persons who act in their separate interests. An arm’s length transaction is generally a transaction that reflects ordinary commercial dealings between parties acting in their separate interests.
For more information see Income Tax Folio S1-F5-C1, Related Persons and Dealing at Arm’s Length.
Common-law partner – a person who is not your spouse with whom you are living in a conjugal relationship, and to whom at least one of the following situations applies. The person:
- has been living with you in a conjugal relationship and this current relationship has lasted at least 12 continuous months;
Note
In this definition, “12 continuous months” includes any period that you were separated for less than 90 days because of a breakdown in the relationship. - is the parent of your child by birth or adoption
- has custody and control of your child (or had custody and control immediately before the child turned 19 years of age) and your child is wholly dependent on that person for support
Deliberate over contribution – a contribution that an individual makes to the TFSA that results in, or increases, an excess TFSA amount, unless it is reasonable to conclude that the individual neither knew nor ought to have known that the contribution could result in liability for a penalty or tax. Income that is reasonably attributable, directly or indirectly, to a deliberate over contribution is an advantage subject to the special tax on advantages.
Excess TFSA amount – the total of all contributions made by the holder to all their TFSAs at or before a particular time in the calendar year, excluding a qualifying transfer or an exempt contribution,
Minus all of the following amounts:
- the holder’s unused TFSA contribution room at the end of the preceding calendar year
- the total of all withdrawals from the holder’s TFSA in the preceding calendar year, other than a qualifying transfer or a specified distribution
- for a resident of Canada at any time in the year, the TFSA dollar limit for the calendar year; for any other case, nil
- the total of all withdrawals made in the calendar year from all of the holder’s TFSAs, other than a qualifying transfer or a specified distribution, or the portion of the withdrawal that is more than the excess TFSA amount determined at that time
For more information, see the definition Qualifying portion of a withdrawal.
Exempt contribution – a contribution made during the rollover period and designated as exempt by the survivor on prescribed Form RC240, Designation of an Exempt Contribution Tax-Free Savings Account (TFSA), in connection with a payment received from the deceased holder’s TFSA.
Exempt period – period that begins when the holder dies and that ends at the end of the first calendar year that begins after the holder’s death, or when the trust ceases to exist, if earlier.
Fair market value (FMV) – is generally considered to mean the highest price expressed in terms of money that can be obtained in an open and unrestricted market between informed and prudent parties, who are dealing at arm’s length, and under no compulsion to buy or sell.
For information on the valuation of securities of closely-held corporations, see Information Circular IC89-3, Policy Statement on Business Equity Valuations.
Holder – the individual who entered into the TFSA arrangement and, after the death of the holder, the individual’s spouse or common-law partner (the survivor) if designated as the successor holder of the TFSA. The surviving spouse or common-law partner can designate a subsequent survivor as their successor holder.
Issuer – a trust company, a licensed annuities provider, a person who is, or is eligible to become, a member of the Canadian Payments Association, or a credit union with which an individual has a qualifying arrangement.
Non-arm’s length – generally refers to a relationship or transaction between persons who are related to each other.
However, a non-arm’s length relationship might also exist between unrelated individuals, partnerships or corporations, depending on the circumstances. For more information, see the definition of Arm’s length.
For more information, see Income Tax Folio SI-F5-C1, Related Persons and Dealing at Arm’s Length.
Non-qualified investment – any property that is not a qualified investment for the trust. For more information, see Income Tax Folio S3-F10-C1, Qualified Investments – RRSPs, RESPs, RRIFs, RDSPs and TFSAs
Prohibited investment – this is property to which the TFSA holder is closely connected. It includes any of the following:
- a debt of the holder;
- a debt or share of, or an interest in, a corporation, trust or partnership in which the holder has a significant interest (generally a 10% or greater interest, taking into account non arm’s length holdings)
- a debt or share of, or an interest in, a corporation, trust or partnership with which the holder, does not deal at arm’s length
A prohibited investment does not include a mortgage loan that is insured by the Canada Mortgage and Housing Corporation or by an approved private insurer. It also does not include certain investment funds and certain widely held investments which reflect a low risk of self-dealing. For more information see Income Tax Folio S3-F10-C2, Prohibited Investments – RRSPs, RESPs, RRIFs, RDSPs and TFSAs
Qualified donee – the Income Tax Act permits qualified donees to issue tax receipts for donations they receive from individuals or corporations. Some examples of qualified donees are registered charities, Canadian municipalities, registered Canadian amateur athletic associations, the United Nations or one of their agencies, or universities outside Canada that accept Canadian students.
Qualified investment – an investment in properties, (except real property) including money, guaranteed investment certificates, government and corporate bonds, mutual funds, and securities listed on a designated stock exchange. The types of investments that qualify for TFSAs are generally similar to those that qualify for registered retirement savings plans. For more information, see Income Tax Folio S3-F10-C1, Qualified Investments – RRSPs, RESPs, RRIFs, RDSPs and TFSAs
Qualifying arrangement – an arrangement that is entered into after 2008 between an issuer and an individual (other than a trust) who is at least 18 years of age, that is any of the following:
- an arrangement in trust with an issuer that is authorized in Canada to offer to the public its services as a trustee
- an annuity contract with an issuer that is a licensed annuities provider
- a deposit with an issuer that is a person who is a member, or is eligible to be a member, of the Canadian Payments Association, or a credit union that is a shareholder or member of a “central” for the purposes of the Canadian Payments Act
Qualifying portion of a withdrawal – the portion of a withdrawal from the TFSA (excluding a qualifying transfer or a specified distribution), made in the year, that was required to reduce or eliminate a previously determined excess TFSA amount.
Qualifying transfer – a direct transfer between a holder’s TFSAs, or a direct transfer between a holder’s TFSA and the TFSA of their current or former spouse or common-law partner if the transfer relates to payments under a decree, order, or judgment of a court, or under a written agreement relating to a division of property in settlement of rights arising from the breakdown of their relationship and they are living separate and apart at the time of the transfer.
Rollover period – the period that begins when the TFSA holder dies and ends at the end of the calendar year that follows the year of death.
Self-directed TFSA – a vehicle that allows you to build and manage your own investment portfolio by buying and selling various types of investments.
Specified distribution – a distribution from the TFSA to the extent that it is, or is reasonably attributable to, an amount that is any of the following:
- an advantage
- specified non-qualified investment income
- income that is taxable in a TFSA trust
- income earned on excess contributions or non-resident contributions
A specified distribution does not create or increase unused TFSA contribution room in the following year, nor does it reduce or eliminate an excess TFSA amount.
Specified non-qualified investment income – income (excluding the dividend gross-up), or a capital gain that is reasonably attributable, directly or indirectly, to an amount that is taxable for any TFSA of the holder (for example, subsequent generation income earned on non-qualified investment income or on income from a business carried on by the TFSA).
Spouse – a person to whom you are legally married.
Successor holder – in provinces or territories that permit the TFSA beneficiary designation, a successor holder is a spouse or common-law partner of the holder at the time of death, named by the deceased as the successor holder of the TFSA, who acquires all of the rights of the holder under the arrangement including the right to revoke any beneficiary designation. This spouse or common-law partner becomes the new account holder.
Survivor – an individual who is, immediately before the TFSA holder’s death, a spouse or common-law partner of the holder.
Note
A survivor may designate a successor holder (for example, a new spouse or common-law partner of the survivor in case of remarriage of the survivor). A successor holder designation is effective only if it is recognized under applicable provincial or territorial law and the successor holder acquired all of the survivor’s rights as holder, including the right to revoke any previous beneficiary designation by the survivor in relation to the TFSA.
Survivor payment – a payment received by a survivor during the rollover period, as a consequence of the holder’s death, directly or indirectly out of or under an arrangement that ceased to be a TFSA because of the holder’s death.
Swap transaction – is any transfer of property between the TFSA and its holder (or non arm’s length person). Exceptions are provided for contributions to and distributions from the TFSA, purchase and sale transactions between the TFSA and another TFSA of the holder, and transactions relating to insured mortgages. For more information on swap transactions, and applicable transitional rules, see Income Tax Folio S3-F10-C3, Advantages – RRSPs, RESPs, RRIFs, RDSPs and TFSAs
Unused TFSA contribution room – the amount, either positive or negative, at the end of a particular calendar year after 2008, determined by the holder’s unused TFSA contribution room at the end of the year preceding the particular year.
Plus:
- the total amount of all withdrawals made from the holder’s TFSA in the preceding calendar year, excluding a qualifying transfer or a specified distribution.
- the TFSA dollar limit for the particular year if, at some point in that year, the individual is at least 18 years of age and a resident of Canada. In all other cases, the amount is nil.
Minus:
- the total of all TFSA contributions made by the holder in the particular year excluding a qualifying transfer or an exempt contribution.
What is a TFSA?
The TFSA program began in 2009. It is a way for individuals who are 18 years of age or older and who have a valid social insurance number (SIN) to set money aside tax-free throughout their lifetime.
Contributions to a TFSA are not deductible for income tax purposes. Any amount contributed as well as any income earned in the account (for example, investment income and capital gains) is generally tax-free, even when it is withdrawn.
Administrative or other fees in relation to a TFSA and any interest on money borrowed to contribute to a TFSA are not tax-deductible.
Types of TFSAs
There are three types of TFSAs that can be offered: a deposit, an annuity contract, and an arrangement in trust.
Banks, insurance companies, credit unions, and trust companies can all issue TFSAs.
For more information about a certain type of TFSA, contact a TFSA issuer.
Who can open a TFSA?
Any individual that is a resident of Canada who has a valid SIN and who is 18 years of age or older is eligible to open a TFSA.
Note
Any individual that is a non-resident of Canada who has a valid SIN and who is 18 years of age or older is also eligible to open a TFSA. However, any contributions made while a non-resident will be subject to a 1% tax for each month the contribution stays in the account. For more information, see Non-residents of Canada.
You cannot open a TFSA or contribute to one until you turn 18. However, when you turn 18, you will be able to contribute up to the full TFSA dollar limit for that year.
Example
Julie turns 18 on May 13, 2026. She will not be able to open and contribute to a TFSA until that date. However, from May 13, 2026, she can open a TFSA and contribute the full 2026 TFSA dollar limit.
Note
In certain provinces and territories, the legal age at which an individual can enter into a contract (which includes opening a TFSA) is 19. In this case, when the individual turns 19 and is able to enter into a contract in that jurisdiction, the TFSA contribution room for the year an individual turns 18 is carried over to the following year.
How to open a TFSA
You can have more than one TFSA at any given time, but the total amount you contribute to your TFSAs cannot be more than your available TFSA contribution room for that year.
To open a TFSA, you must do both of the following:
- Contact your financial institution, credit union, or insurance company (issuer).
- Provide the issuer with your SIN and date of birth so the issuer can register your qualifying arrangement as a TFSA. Your issuer could ask for supporting documents.
Note
If you do not provide this information or provide incorrect information to your issuer, the registration of your TFSA cam be denied. If your TFSA is not registered, any income that is earned will have to be reported on your income tax and benefit return.
Self-directed TFSA
You can set up a self-directed TFSA if you prefer to build and manage your own investment portfolio by buying and selling different types of investments. For more information, contact a TFSA issuer.
Contributions
The maximum amount that you can contribute to your TFSA is limited by your TFSA contribution room.
All TFSA contributions made during the year, including the replacement or re-contribution of withdrawals made from a TFSA, will count against your contribution room.
Note
Qualifying transfers, exempt contributions and specified distributions are not considered in the calculation of contribution room.
At any time in the year, if you contribute more than your available TFSA contribution room you will have to pay a tax equal to 1% of the highest excess TFSA amount in the month, for each month that the excess amount stays in your account. For more information, see Tax payable on excess TFSA amount.
You do not need to have earned income to contribute to a TFSA. As the account holder, you are the only person who can do the following with your TFSA:
- make contributions
- make withdrawals
- determine how funds are invested
You can give your spouse or common law partner money so that they can contribute to their own TFSA, and this amount or any earned income from that amount will not be allocated back to you. The total contributions you each make to your own TFSAs cannot be more than your TFSA contribution room. For more information, see TFSA contribution room.
Management fees related to a TFSA trust and paid by the holder are not considered to be contributions to the TFSA. The payment of investment counsel, transfer, or other fees by a TFSA trust will not result in a distribution (withdrawal) from the TFSA trust.