TFSA (Tax-Free Savings Account)
Quick Definition
A flexible registered account where investment growth and withdrawals are completely tax-free.
Full Explanation
A Tax-Free Savings Account (TFSA) is a registered account available to Canadians aged 18+ where contributions grow completely tax-free and withdrawals are not taxable. Unlike RRSPs, TFSA contributions are not tax-deductible, but the tax-free growth and withdrawal flexibility make TFSAs ideal for both short-term savings and long-term investing. The annual contribution limit for 2024 is $7,000. Unused contribution room accumulates from age 18 (since TFSAs launched in 2009), and room is re-contributed the following year after a withdrawal.
Related Terms
RRSP (Registered Retirement Savings Plan)
A tax-deferred savings account for retirement, with deductible contributions.
RRSP/TFSA Contribution Room
The cumulative amount you are allowed to deposit into your registered accounts.
Tax-Free Growth
Investment gains that are never subject to income tax, like TFSA earnings.
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