11- Tax-free savings account

Module 07 – Placements

13 Nov 20243 min read

Individuals who are 18 years of age or older may contribute annually to a TFSA and income earned on such amounts is sheltered from income tax. The maximum amount that can be invested in 2025 is $7,000.17 Unlike the RRSP, TFSA contributions are not deductible for tax purposes. However, capital and income withdrawals are not taxable.

Consider making a donation to your child or adult grandchild to invest in a TFSA so that the amounts invested can earn income tax-free.

The following table compares the main features of the most common registered plans, i.e., RRSP, RESP, FHSA and TFSA.18

RRSP

RESP

TFSA

FHSA

Contributions

Annual maximum

Lesser of:

  • 18% of previous year's earned income
  • Annual limit ($32,490 in 2025)

No limit (but grant limited to the first $2,500 of contributions paid each year)

$7,000 in 2025 (cumulative total of $102,000 in 2025)$8,000/year (not indexed)

Cumulative limit

None

$50,000

None

$40,000

Grant

No

Yes

No

No

Deductibility

Deductible

Not deductible

Not deductible

Deductible

Unused contributions room

Can be carried forward

Can be carried forward (grants limited when carried forward)

Can be carried forward

Unused ceiling can be carried forward up to a maximum of $8,000

Excess contributions

  • $2,000 permitted
  • Penalty of 1% per month in excess of that amount

Penalty of 1% per month

Withdrawals

Taxation

Taxable (except for HBP and LLP repaid on time)

Partially taxable

Non-taxable

Non-taxable if eligible withdrawal

Specific conditions

None (except for HBP and LLP)

Beneficiary must pursue post-secondary education

None

Withdrawals must be used to purchase a first eligible home

Ceiling

  • None (except for HBP and LLP)
  • Withdrawals do not create new contribution room

Withdrawal limit for first study session:

  • $8,000 if full-time
  • $2,500 if part-time
  • None
  • Withdrawals create new contribution room in following year
  • None
  • Withdrawals do not create new contribution room

Duration and Age Restriction

Minimum age of beneficiary

  • No minimum age (18 years to be entitled to the $2,000 excess contribution)

No minimum age

18 years

18 years

End of plan

The year in which the policyholder reaches the age of 71

35 years after opening (40 years for a disabled person)19

No maximum age or deadline for withdrawals

At the end of the first of the following years:

  • The year of the FHSA's 15th anniversary
  • The year in which the individual turns 71
  • The year following the first eligible withdrawal

17 Amount indexed annually since 2010 and rounded to nearest $500. The annual contribution ceiling was $7,000 in 2024, $6,500 in 2023, $6,000 from 2019 to 2022, and $5,500 for the years 2013, 2014 and from 2016 to 2018, $10,000 in 2015, and $5,000 for 2009 to 2012 (cumulative total of $102,000 in 2025).

18 Parents who want to save for the financial security of a handicapped child can also invest in an RDSP (see Section IV).

19 No contributions after the 31st anniversary of opening the RESP (35th anniversary for a disabled person). Beneficiaries are entitled to a grant for contributions made on their behalf until the end of the calendar year in which they reach the age of 17 (before the age of 21 for bounds).

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Section 07 - Investments

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