A Tax-Free Savings Account (TFSA) lets your investments grow completely tax-free — you don’t pay tax on interest, dividends, or capital gains earned inside the account, and withdrawals are also tax-free.
However, the government sets limits on how much you can contribute each year and in total over your lifetime. If you contribute more than your available contribution room, you may owe a penalty tax.
Contribution limits — current rules
For 2026, the annual TFSA contribution limit is $7,000.
If you were 18 or older in 2009 and have been a Canadian resident since then, and you’ve never contributed to a TFSA, your total cumulative contribution room by 2026 is $109,000.
Unused contribution room from previous years carries forward indefinitely and is added to your available room.
If you’ve withdrawn money from a TFSA, that amount is added back to your available contribution room on January 1 of the following year.
To know your exact available contribution room, log in to your Canada Revenue Agency (CRA) “My Account” or check your latest CRA statements — this will reflect your personal history of contributions and withdrawals.
Penalties for over-contributing
If you contribute more than your allowable room, the CRA charges a tax equal to 1 % per month on the excess amount for each month that the excess remains in your TFSA. For example, if you over-contribute by $100, you would owe $1 per month until the excess is removed or you gain enough new room.
Withdrawals
You can withdraw money from a TFSA at any time without paying tax. Withdrawals do not reduce your contribution room permanently — they are added back to your available room, but only on January 1 of the following year.