Key takeaways
- Tax-Free Savings Accounts (TFSAs) are the most flexible type of registered account and can be used for any savings goal, whether short- or long-term.
- It’s important to stay within the overall contribution limit, no matter how many TFSAs you hold. Excess funds will be taxed until they are removed.
- TFSAs can hold cash or investments, such as private alternative investments which can help manage volatility and promote stable growth within the account.
Since 2009, Tax-Free Savings Accounts (TFSAs) have been a big hit with Canadians looking to save, while offering the flexibility to withdraw funds anytime and for any purpose. Unlike Registered Retirement Savings Plans (RRSPs) and First Home Savings Accounts (FHSAs), the amount you contribute to your TFSA is not tax deductible, but any amount contributed—as well as any income earned within the account through investment income and capital gains—can be withdrawn tax-free. While the TFSA contribution limit is relatively small—$7,000 is the maximum TFSA contribution for 2024—the flexibility of TFSA accounts makes them a smart option for many investors. TFSAs can hold a variety of investment types, including cash, mutual funds, securities, Guaranteed Investment Certificates (GICs), bonds, and private investments.
Who can open a TFSA?
To open a TFSA in Canada, all you need is a valid Social Insurance Number (SIN) and proof of age. Account holders must be 18 years of age or older, but there is no upper age limit for holding these accounts and no requirement to convert them when you reach a certain age. Unlike other registered accounts, such as FHSAs which can only remain open for 15 years, TFSAs can remain open indefinitely. It’s important to note that while you don’t need to be physically living in Canada to open or access a TFSA, non-residents will be subject to a 1% tax for each month the balance stays in the account.
Types of TFSAs
There are three different types of TFSA: a deposit, an annuity contract, or an arrangement in trust. Each offers a different way of managing the account—from self-service accounts to those fully-managed by a financial institution or wealth professional. The specific terms of each TFSA will vary depending on the financial institution issuing the account, whether that’s a bank, credit union, insurance company, or trust company.
Contribution limits
While the annual maximum limit is the same for everyone, your personal amount may differ. For example, if you did not contribute the full amount in 2023, that difference can be carried forward to your 2024 limit.
While you can have multiple TFSAs, the overall contribution limit applies to your combined TFSA holdings. For example, even if you have three TFSAs, the total you can contribute for 2024 remains $7,000. If you withdraw funds during the calendar year, the contribution room remains the same. For example, if you contribute $7,000 and withdraw $1,000, you are not allowed to contribute another $1,000 at a later point in the year. The lifetime limit for TFSAs is currently $95,000. For example, if you didn’t contribute to a TFSA between 2009 and 2024 and you were at least 18 in 2009, your total contribution room would be $95,000.
It’s important to note that if you do exceed the contribution limit, you will be charged 1% of the excess contribution per month until you withdraw it from the account.
| Year | Annual Limit |
Cumulative Limit |
|---|---|---|
| 2024 | $7,000 | $95,000 |
| 2023 | $6,500 | $88,000 |
| 2022 | $6,000 | $81,500 |
| 2021 | $6,000 | $75,500 |
| 2020 | $6,000 | $69,500 |
| 2019 | $6,000 | $63,500 |
| 2018 | $5,500 | $57,500 |
| 2017 | $5,500 | $52,000 |
| 2016 | $5,500 | $46,500 |
| 2015 | $10,000 | $41,000 |
| 2014 | $5,500 | $31,000 |
| 2013 | $5,500 | $25,500 |
| 2012 | $5,000 | $20,000 |
| 2011 | $5,000 | $15,000 |
| 2010 | 5,000 | $10,000 |
| 2009* | $5,000 | $5,000 |
* TFSAs were introduced in 2009
TFSA interest rates
While the word savings is right there in its name, a TFSA in and of itself doesn’t generate much interest (anywhere from 0.75-over 5% but averaging around 3% as of November 2024). To maximize the savings potential of the account, you may choose to stock it with investment products that may produce a higher yield, like private alternative investments. If the value of the investments grows, you may be able to reach your savings goals more quickly. Another great benefit is that you will not be taxed on these capital gains when you withdraw the funds.
TFSA withdrawal rules
One of the key TFSA benefits is their inherent flexibility. There really aren’t any TFSA withdrawal rules to note, but it’s important to know you can’t “day trade” individual stocks within the account if you are managing it yourself. There are no restrictions on moving your TFSA from one financial institution to another, but it’s critical that you initiate this transfer through the financial institution (this is called a direct transfer). If you withdraw the funds yourself (an indirect transfer), the government will consider it a TFSA withdrawal, and it will affect your contribution limit. With a direct transfer, there are no tax implications, only the possibility of a nominal fee (usually between $50-$200).
Supporting steady growth in your TFSA with private alternative investments
Promoting steady growth and avoiding excessive market volatility is a smart idea for any registered accounts, but especially so for TFSAs, since their funds are accessible enough to support shorter-term goals. Private alternative investments are well worth considering if you are looking to diversify investments in your TFSA, mitigate volatility, and promote greater stability.
Private real estate investment trusts (REITs) are one private investment option that can offer investors access to institutional-quality real estate. Valuation is based on market value of the properties in the REIT and the rental income they produce. Other private alternatives offer access to additional types of assets, such as clean energy infrastructure, with the same benefit of being comparatively shielded from public market volatility.
Skyline offers a suite of private alternative investments that may help maximize the value of your TFSA and help you achieve your savings goals. These investments, which specialize in real estate and clean energy, have a proven track record of resilience amid market uncertainty, and have provided a historical annualized return of 8.93-14.93% since inception (Apartment REIT 13.89% since inception in 2016 as at June 30, 2024; Retail REIT 12.13% since inception in 2013 as at June 30, 2024; Industrial REIT 14.93 since inception in 2012 as at June 30, 2024; and Clean Energy Fund 8.93% since inception in 2018 as at October 1, 2024).
Investing with Skyline may help you accelerate savings not only in your TFSA, but also in your Registered Retirement Savings Plan (RRSP), Registered Education Savings Account (RESP), or First Home Savings Account (FHSA).
About Skyline Group of Companies
Skyline Group of Companies (“Skyline”) is a fully integrated asset acquisition, management, development, and investment entity. It is comprised of companies that provide services in real estate management and development, as well as clean energy management and development. Skyline currently manages more than $8.95 billion* across its real estate and clean energy platforms.
With approximately 1,000 employees across Canada, Skyline works to provide safe, clean, and comfortable places for tenants to call home, great places to do business, sustainable solutions for a greener future, and an engaging experience for its investors.
View Skyline’s 20th Anniversary celebration video to see how Skyline is grounded in real estate, powered by people, and growing for the future.
For more information about Skyline Group of Companies, please visit SkylineGroupOfCompanies.ca.
*As at September 30, 2024