No matter what you’re saving for, you may be able to get there faster with an RBC Tax-Free Savings Account (TFSA), a flexible registered investment account
Registered Investment Accounts
Registered investment accounts offer unique tax advantages to help you save for the future. For example, the Registered Retirement Savings Plan (RRSP) lets you deduct your contributions from your taxable income now and defer the taxes until you withdraw that money in retirement, while investment income you earn in a Tax-Free Savings Account (TFSA) is never taxed. The features, benefits and rules for registered accounts are determined by the Government of Canada.
you can use to save for any big-ticket item or goal.
Below, we’ve rounded up the rules, contribution limits and other information you should know in one handy spot.*
How it works, who can open one and the investments you can hold.
TFSAs and RRSPs differ a few ways—just keep in mind you can have both1Legal:
TFSA investment earnings are tax-free; RRSP investment earnings are tax-deferred.
You can withdraw money from your TFSA at any time (depending on what you invested in) without paying tax. Any funds you withdraw from your RRSP are added to your taxable income for the year of the withdrawal.
You have to be at least 18 years of age (or the age of majority in your province) to be eligible for a TFSA; there is no set minimum age for an RRSP.
Unlike an RRSP where contributions are not permitted after Dec 31 of the year you turn 71, you can keep contributing to a TFSA past age 71.
TFSAs don’t require you to have earned income to be eligible to contribute; RRSPs do.
While the contribution limit for 2023 is $6,500, you can also make up any unused contribution room from previous years. (more on that below). This limit is set by Canada Revenue Agency (CRA) and can change from year to year.
You can add money in small amounts throughout the year or make a big contribution all at once. Try the TFSA calculator to see the benefits of regular, automatic contributions.
The best way to know how much you can contribute for the current year is to check your most recent Notice of Assessment from the CRA. Fortunately, TFSA contribution room is cumulative, which means any unused room from previous years is added to your current room—also known as your carry-forward amount. Also, if you withdraw money, those amounts are added to your contribution room the following year.
TFSA contribution room starts adding up when you turn 18, no matter when you open your account. If you were 18 or older in 2009, your contribution room has accumulated every year since then.
Let’s say you’ve maxed out your TFSA each year since it became available in 2009 and you have not withdrawn any money.
The current year’s contribution limit is $6,500 and so far, this year, you’ve put in $4,500. If you don’t contribute the additional $2,000 this year, $2,000 will be added to your annual contribution maximum next year and will continue to carry forward into future calendar years until you make up the contribution.
Contribution Limit Per Year
2009 - 2012
2013 - 2014
2016 - 2018
2019 - 2022
The CRA charges a penalty tax of 1% per month on excess contributions until it’s withdrawn.
Keep in mind: if you withdraw and recontribute to a TFSA in the same year, it could result in an over-contribution status.
Here’s another great thing about TFSAs—you can withdraw your money at any time, for any reason without tax consequences. Just keep in mind that the timing of your withdrawal may depend on what you invested in—for example, non-redeemable GICs must be held until maturity.
Any withdrawal is added back to your TFSA contribution room the following year.
TFSA Taxes, Government Benefits and More
How TFSAs are taxed, effect on income-based benefits/credits and fees.
One of the most notable features of a TFSA is its tax benefits. Here’s a quick look at how each of the following is taxed:
Contributions: Unlike RRSPs, TFSA contributions can’t be deducted on your tax return.
Investment growth: Investment income and capital gains within a TFSA are not taxed, giving your money the opportunity to grow faster.
Withdrawals: They’re not taxed and don’t count as taxable income.
Note: Since the earnings in your TFSA are tax-free, it also means that you can’t use any capital losses in your account against taxable gains outside your account.
You can transfer TFSAs between financial institutions as much as you want without being taxed, but there may be transfer out or other fees.
There’s no limit on how many TFSAs you can have—but the total contribution room of all your accounts combined is the same as if you only had one.
Another great feature of a TFSA is that it won’t affect your eligibility for income-based government benefits or credits, like the Canada Child Tax Benefit, the Working Income Tax Benefit, the Guaranteed Income Supplement, Old Age Security (OAS) or the Goods and Services Tax (GST) credit.
At RBC, we don’t charge any account-related fees for TFSAs, with one exception—there’s a service fee if you transfer your TFSA outside of RBC. The fee is $50 at RBC Royal Bank, $135 at RBC InvestEase and $150 at RBC Direct Investing. The fee could change, but we’ll let you know at least 30 days before the changes go into effect.
Invest in a TFSA Today
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Royal Bank of Canada and RMFI shall not be liable for any losses or damages arising from any errors or omissions in information contained in this calculator.
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The services provided by RBC InvestEase are only available in Canada.
Information about the TFSA is based on what is currently available from the Canadian government and can be subject to change.
Subject to meeting the eligibility requirements of both accounts.
Assets in a TFSA must be Qualified Investments under the Income Tax Act. If the TFSA holds non-Qualified Investments, it could be subject to tax.
Real-time streaming quotes are available automatically to all clients for exchange listed equities, ETFs and most over-the-counter (OTC) securities. Real-time streaming quotes for options and grey market OTC securities are available to Active Traders and Royal Circle clients upon accepting the terms and conditions of all exchange agreements on the RBC Direct Investing online investing site.